Judge: Ronald F. Frank, Case: 23TRCV02125, Date: 2024-03-26 Tentative Ruling
Case Number: 23TRCV02125 Hearing Date: March 26, 2024 Dept: 8
Tentative Ruling¿
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HEARING DATE: March 26, 2024
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CASE NUMBER: 23TRCV02125
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CASE NAME: Daniel Wei; Natalie
Wei v. American Honda Motor Co., Inc.
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MOVING PARTY: (1) Defendant,
American Honda Motor Co., Inc.
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RESPONDING PARTY: (1) Plaintiff, Daniel Wei and Natalie Wei
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TRIAL DATE: Not
Set.
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MOTION:¿ (1) Motion to Compel Arbitration
Tentative Rulings: (1) American Honda Motor Co., Inc.’s Motion
to Compel Arbitration is GRANTED.
(2) Arbitration status conference set for January 8, 2025, 8:30 a.m.; the April 11, 2024 CMC is advanced and vacated
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I. BACKGROUND¿¿
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A. Factual¿¿
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On September 21, 2023,
Plaintiffs, Daniel Wei and Natalie Wei (collectively “Plaintiffs”) filed a
Complaint against Defendants, American Honda Motor Co., Inc, and DOES 1 through
10. The Complaint alleges causes of action for: ” (1) Violation of Civil Code §
1793.2(d); (2) Violation of Civil Code § 1793.2(b); (3) Violation of Civil Code
§ 1793.2(a)(3); (4) Breach of the Implied Warranty of Merchantability – Civil
Code §§ 1791.1, 1794; 1795.5; and (5) Fraudulent Inducement – Concealment.
The Complaint is based on a January
25, 2020 purchase by Plaintiffs of a 2020 Honda Pilot Honda with corresponding
identification number VIN: 5FNYF5H34LB011117 (hereafter
"Vehicle") from Penske Honda Ontario. Plaintiffs further note that
the causes of action contained in his complaint arise out of warranty and
repair obligations of Honda. (Complaint, ¶ 10.) Plaintiffs contend that the
defects and nonconformities to warranty manifested themselves within the
applicable express warranty period, and include, but are not limited to:
infotainment defects, electrical defects, among other defects and non-conformities.
(Complaint, ¶ 11.)
Defendant, American Honda Motor Co., Inc. (“AHM”) now
files a Motion to Compel Binding Arbitration.
B. Procedural¿¿
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On February 9, 2024, AHM filed a Motion to Compel
Arbitration. On March 14, 2024, Plaintiffs filed an opposition. On March 18,
2024, AHM filed a reply brief.
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 a warrantors from a species of civil penalty if, like
Defendant Honda, they have a certified lemon arbitration program in place.
Here,
the analysis is somewhat different because AHM is not a party to the
arbitration agreement, although one of its authorized dealers is a party to the
agreement upon which AHM’s motion rests, and Plaintiff is a party to that same
arbitration agreement.
B.
Discussion
a. Existence of Arbitration Agreement
Here, the parties agree that there was a written
agreement, the Lease Agreement, that included an arbitration agreement.
However, as noted in Plaintiffs’ opposition, that agreement is between
Plaintiff and Penske Honda Ontario, the dealership. Plaintiffs also note that they
brought this case against Honda based on its breach of its statutory
obligations under the Song-Beverly Act and the express warranty it gave on the
subject vehicle. The portions of the arbitration agreement in the
Lease Agreement state, in pertinent part, as follows:
15. ARBITRATION. The parties
agree that any unresolved disputes shall be submitted to arbitration in
accordance with the Arbitration clause (Section 52). By initialing this
Section, I am confirming that I have read this Section and the Arbitration
clause, including the method of opting out of arbitration. (Id., at p. 3, bold
in original.)
52. ARBITRATION: PLEASE READ THIS
SECTION CAREFULLY 52. ARBITRATION: PLEASE READ THIS ARBITRATION PROVISION
CAREFULLY TO UNDERSTAND YOUR RIGHTS. BY ELECTING ARBITRATION, YOU AGREE THAT
ANY CLAIM THAT YOU MAY HAVE IN THE FUTURE MUST BE RESOLVED THROUGH BINDING
ARBITRATION. YOU WAIVE THE RIGHT TO HAVE YOUR DISPUTE HEARD IN COURT AND WAIVE
THE RIGHT TO BRING CLASS CLAIMS. YOU UNDERSTAND THAT DISCOVERY AND APPEAL
RIGHTS ARE MORE LIMITED IN ARBITRATION
Defendant, AHM, also
notes that the Arbitration Provision then states the following:
Arbitration is a method of resolving
a claim, dispute or controversy without filing a lawsuit. By agreeing to arbitrate,
the right to go to court is waived and instead claims, disputes or
controversies are submitted to binding arbitration. This provision sets forth
the terms and conditions of our agreement. YOU and HONDA agree and acknowledge
that this Lease affects interstate commerce and the Federal Arbitration Act
(“FAA”) applies.
By signing the Arbitration Consent, YOU
elect to have disputes resolved by arbitration. YOU, HONDA, or
any involved third party may pursue a Claim. “Claim” means any dispute between
YOU, HONDA, or any involved third party relating to your account, this Lease,
or our relationship, including any application, the Vehicle, its performance
and any representations, omissions or warranties.
(Declaration of
Sarah Carlson Lambert (“Lambert Decl.”). ¶ 2, Exhibit 1, Lease Contract.)
Here, the Court finds that AHM has
met its initial burden in establishing the existence of an arbitration
agreement. Under Cal. Rules of Court, Rule 3.1330, Defendant only needs to
allege the existence of an arbitration agreement and provide the written
agreement or state verbatim the provision that provides for arbitration. (See Condee
v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-19 [“[Cal.
Rules Court, Rule 3.1330] does not require the petitioner to introduce the
agreement into evidence or provide the court with anything more than a copy or
recitation of its terms. Petitioner need only allege the existence of an
agreement and support the allegation as provided in [Cal. Rules Court, Rule,
Rule 3.1330].”].) The scope of
arbitration under the lease’s terms include disputes concerning “the Vehicle,
its performance and any representations, omissions or warranties.” Unlike other non-signatory cases that have
come before the Court in the years since Felisilda was decided, this arbitration
agreement specifically includes “warranties” within its ambit, and the instant lawsuit
clearly arises out of warranties issues for the subject vehicle.
Thus, the burden now shifts to
Plaintiffs to establish that an arbitration agreement does not exist, to
demonstrate that the subject arbitration provision cannot be interpreted to
require arbitration of the dispute, or to provide evidence establishing a defense
to the arbitration agreement.
b. Third-Party Beneficiary
AHM
argues that it can compel arbitration as a third-party beneficiary to the
arbitration provision. “ ‘A third party beneficiary is someone who may enforce
a contract because the contract is made expressly for his benefit.’ ” (Jensen
v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301, 226 Cal.Rptr.3d
797; see also Civ. Code, § 1559 [“[a] contract, made expressly for the benefit
of a third person, may be enforced by him ....”].) A person “only incidentally
or remotely benefited” from a contract is not a third-party beneficiary. (Lucas
v. Hamm (1961) 56 Cal.2d 583, 590, 15 Cal.Rptr. 821, 364 P.2d 685.) Thus,
“the ‘mere fact that a contract results in benefits to a third party does not
render that party a “third party beneficiary.” (Jensen, at p. 302, 226
Cal.Rptr.3d 797.) Nor does knowledge that the third party may benefit from the
contract suffice. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830,
243 Cal.Rptr.3d 299, 434 P.3d 124 (Goonewardene).) Rather, the parties
to the contract must have intended the third party to benefit.
In
order for a third party to show that the contracting parties intended to
benefit it, under the express terms of the contract at issue and any other
relevant circumstances under which the contract was made, “(1) “the third party
would in fact benefit from the contract”; (2) “a motivating purpose of the
contracting parties was to provide a benefit to the third party”; and (3)
permitting the third party to enforce the contract “is consistent with the
objectives of the contract and the reasonable expectations of the contracting
parties.” (Ochoa, citing Goonewardene, supra, 6 Cal.5th at p.
830.) Here, AHM argues that it is a member of the class of persons for whose
benefit the contract was made. The terms of the lease expressly define “HONDA”
to include:
HONDA means Lessor, Dealer,
Honda Lease Trust, American Honda Finance Corporation (AHFC), American Honda
Motor Co., Inc., Honda Finance Exchange, Inc., Acura Financial Services
(AFS), Honda Financial Services (HFS), HVT, Inc., their parents, subsidiaries,
predecessors, successors, assignees, and officers, employees, representatives
and agents. YOU means Lessee and Co-Lessee to this Lease.
(Lambert Decl., ¶ 2, Exhibit 1, Least
Contract, p. 6.)
Here,
this Court notes that in circumstances in which the manufacturer is not defined
in the arbitration agreement, and the manufacturer has brough a motion claiming
they are a third party beneficiary because of language similar to: “[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,” this this Court will not find that the
manufacture is manifested as “including any such relationship with third
parties who do not sign this contract.” The Second District in Martha Ochoa
v. Ford Motor Company (2023) 89 Cal.App.5th 1324 (review granted July 19,
2023, S279969) noted that that allowing a manufacturer to enforce the
arbitration provision as a third party beneficiary would be inconsistent with
the “reasonable expectations of the contracting parties” where the contracting
parties specifically vested the right of enforcement in the purchaser and the
dealer only. Here, unlike Ochoa, Yeh v. Superior Court of Contra
Costa County (2023) 95 Cal.App.5th 264, 272, Kielar v. Superior Court
(2023) 94 Cal.App.5th 614, 620, and Montemayor v. Ford Motor Co. (2023)
92 Cal.App.5th 958, 971, the contracting parties painted with a broader brush
and expressly intended to include AHM and warranty claims in the scope of the arbitration
agreement.
The
Court also notes the Ninth Circuit Court of Appeal’s decision of Ngo v. BMW
of North America (9th Cir. 2022) 23 F.4th 943, which while not binding on this
state court is persuasive nonetheless because it is a federal appellate
decision bearing on the interpretation of federal law and the federal
legislature’s intent. The the Ninth
Circuit reasoning with respect to the law of arbitration is persuasive because
the arbitration provision of the lease contract here expressly states that any
arbitration under that contract provision “shall be governed by the Federal
Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state law concerning
arbitration.” In Ngo, the Ninth Circuit Court found that BMW could not
enforce the arbitration provision because the clause, which while similar to
the one at issue, was strictly limited to the dealership and the Plaintiff but did
not mention BMW or warranties. (See Ngo, supra, at p. 948.)
However, this contract in this case,
did not merely state a clause like: “[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.”
Instead, included in the definition of “HONDA” was AHM. As such, this Court finds
that Defendant AHM has shown that although it is a nonsignatory of the lease
agreement, the inclusion of AHM in the arbitration clause would benefit
defendant by allowing these claims to be resolved by arbitration. AHM is an express third-party
beneficiary. The inclusion of AHM as a
party who may pursue a claim in arbitration shows that the parties intended to provide
a benefit to AHM, not merely the leasing dealer, as to the ability to seek
arbitration of covered claims. Lastly, under the arbitration clause AHM would
have also been able to pursue a claim through arbitration. Therefore, despite
arguments made in Plaintiffs’ opposition, this Court finds that all three
elements are met, and the defendant is a third party beneficiary.
C.
Equitable Estoppel
Here, the
Court acknowledges Plaintiff’s argument, although not relied upon in the moving
papers, that equitable estoppel does not apply to allow Defendant, a
nonsignatory to arbitration agreement, to compel arbitration since Felisilda
is distinguishable from this matter, and such position is supported by Ngo
and Ochoa, Yeh, Kielar and Montemayor. This Court
agrees, but notes that unlike the language in Ochoa, this Court has
already found that Defendant AHM may enforce the arbitration agreement as a third-party
beneficiary.
D.
Unconscionability
Plaintiffs next argue that in their opposition that
the contract drafted by AHM unconscionable.
Unconscionability is a valid
defense to a petition to compel arbitration. (Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1143.) State law governs the
“unconscionability” defense. (Doctor’s Assocs., Inc. v. Casarotto (1996)
517 US 681, 687.) The core concern of the unconscionability doctrine is the
“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,
supra, 57 Cal.4th at 1145.) The unconscionability doctrine ensures that
contracts—particularly contracts of adhesion—do not impose terms that have been
variously described as overly harsh, unduly oppressive, so one-sided as to
shock the conscience, or unfairly one-sided. (Id.) Here, Plaintiffs have not identified any
overly harsh or unduly oppressive provisions, other than depriving them of the
court system to resolve their dispute without any other option. The Court finds that such a deprivation,
without much more, is no overly harsh, unduly oppressive, nor shocking of the
conscience.
“The procedural element of unconscionability focuses on
whether the contract is one of adhesion. (Armendariz, supra, 24
Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) Procedural unconscionability focuses on whether there
is “oppression” arising from an inequality of bargaining power or “surprise”
arising from buried terms in a complex printed form. (Armendariz, supra,
24 Cal.4th at p. 114; Mercuro v. Superior Court, supra, 96 Cal.App.4th
at p. 174.) The substantive element addresses the existence of overly harsh or
one-sided terms. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064,
1071 [130 Cal.Rptr.2d 892, 63 P.3d 979]; Armendariz, supra, 24
Cal.4th at p. 114.) An agreement to arbitrate is unenforceable only if both the
procedural and substantive elements are satisfied. (Armendariz, supra,
24 Cal.4th at p. 113; Mercuro v. Superior Court, supra, 96
Cal.App.4th at p. 174.) However, Armendariz held, “[T]he more
substantively oppressive the contract term, the less evidence of procedural
unconscionability is required to come to the conclusion that the term is
unenforceable, and vice versa.” (Armendariz, at p. 114; see also Kinney
v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329.).” McManus
v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.)
Procedural Unconscionability
Plaintiffs
argue that the arbitration agreement are adhesive and therefore procedurally
unconscionable. Plaintiffs base their arguments on the fact that contract is presented
as a ‘take it or leave it’ without any opportunity to negotiate its harshly
one-sided terms. Further, Plaintiffs argue that the full definition of “HONDA”
was only later defined what entities comprised the term, and that the
arbitration provision itself, is attenuated with small fine print. Here, the
Court disagrees. The Arbitration Agreement appears to be on the last page, is
in the same size type as the rest of the agreement, and is in fact, bolded more
so than other provisions on the page. Further, When there is no other
indication of oppression other than the adhesive aspect of an agreement, the
degree of procedural unconscionability is low. (Serpa v. California Surety
Investigations, Inc. (2013) 215 Cal.App.4th 695, 704.)
As such,
this Court find that the procedural unconscionability is low.
Substantive Unconscionability
Next, Plaintiffs argue that the
arbitration agreement is substantively unconscionable because it is devoid of
mutuality as AHM is not bound to arbitrate any claims against Plaintiffs. The
Court does not find that this – alone – is enough to find substantive
unconscionability. What
Plaintiffs fail to acknowledge is that while AHM may not be bound to
arbitrating claims against Plaintiffs, the terms of the arbitration, if chosen
by the parties, apply equally to both sides. Here, the Court does not find
enough unconscionability to find the entire arbitration agreement
unconscionable.
IV. CONCLUSION¿¿
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For the foregoing reasons, AHM’s Motion to
Compel Arbitration is GRANTED.
AHM is ordered to give
notice.