Judge Ronald F. Frank, Case Number: 24TRCV0265, Date: 2025-01-07 Tentative Ruling

Judge: Ronald F. Frank, Case: 24TRCV0265, Date: 2025-01-07 Tentative Ruling

Case Number: 24TRCV0265 Hearing Date: January 7, 2025 Dept: 8

Tentative Ruling¿

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HEARING DATE: January 7, 2024

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CASE NUMBER: 24TRCV0265

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CASE NAME: Marcelo Carvalho; Sayed Qubadi Carvelho v. Mercedes Benz USA, LLC., et al.

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MOVING PARTY: (1) Defendant, Mercedes Benz USA, LLC

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RESPONDING PARTY: (1) Plaintiffs, Marcelo Carvalho and Sayed Qubadi Carvalho

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TRIAL DATE: Not Set.

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MOTION:¿ (1) Motion to Compel Arbitration

Tentative Rulings: (1) GRANTED. MBUSA shall initiate the arbitration and pay the requisite filing fee within 30 days of this ruling. The Court will set an arbitration status conference in the Fall of 2025

I. BACKGROUND¿¿

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A. Factual¿¿

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On September 5, 2024, Plaintiffs, Marcelo Carvalho and Sayed Qubadi Carvalho (collectively “Plaintiffs”) filed a complaint against Defendants, Mercedes Benz USA, LLC, and Mercedes Benz of South Bay, 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) Negligent Repair.

The complaint is based on a February 7, 2023 purchase by Plaintiffs of a 2023 Mercedez Benz GLE, vehicle identification number: 4JGFD6BB8PA842052 (hereafter "Vehicle") from Mercedes Benz of South Bay. Plaintiffs state that the causes of action contained in their complaint arise out of warranty and repair obligations of Mercedes Benz USA, LLC (“MBUSA”). (Complaint, ¶ 11.) Plaintiffs contend that the defects and nonconformities to warranty manifested themselves within the applicable express warranty period, and include, but are not limited to: engine defects, transmission defects, electrical defects, body defects, and other defects and nonconformities. (Complaint, ¶ 12)

Defendant, MBUSA now files a Motion to Compel Binding Arbitration.

B. Procedural¿¿

On October 11, 2024, MBUSA filed a Motion to Compel Arbitration. On December 23, 2024, Plaintiffs filed an opposition brief. On December 30, 2024, MBUSA filed a reply brief.

II. REQUEST FOR JUDICIAL NOTICE

With the moving papers, MBUSA has requested this Court take judicial notice of the following document:

1. Plaintiff Marcelo Carvalho and Sayed Qubadi Carcalh’s Complaint, filed on or about September 5, 2024. (Declaration of Ali Ameripour, Exhibit “1”.)

The Court GRANTS this request and takes judicial notice of the above document .

Additionally, with Plaintiffs’ opposition papers, Plaintiffs have requested this Court take judicial notice of the follow:

1. Ford Motor Warranty Cases (Cal. Ct. App. Apr. 4, 2023) 89 Cal.App.5th 1324 (“Ochoa v. Ford”), review granted, (Exhibit A.)

2. Rosanna Montemayor et al. v. Ford Motor Company, 92 Cal.App.5th 958 (Cal. Ct. App. June 26, 2023) (“Montemayor”), review granted. (Exhibit B.)

3. Kielar v. The Superior Court of Placer County, 94 Cal.App. 5th 614 (Cal. Ct. App. August 16, 2023) (“Kielar”), review granted. (Exhibit C.)

4. California Court of Appeal, Third Appellate District’s August 28, 2023 Response to Petition for Writ of Mandate in Campos et al. v. The Superior Court of Butte County, No. C098848. (Exhibit D.)

5. California Court of Appeal, Third Appellate District’s August 28, 2023 Response to Petition for Writ of Mandate in Ortiz et al. v. The Superior Court of Sacramento County, No. C099135. (Exhibit E.)

6. Yeh v. Superior Ct. of Contra Costa Cnty., 95 Cal.App.5th 264 (Cal. Ct. App. Sept. 6, 2023) (“Yeh”), review granted. (Exhibit F.)

7. Davis et al. v. Nissan North America, Inc., et al. (“Davis”) (Cal. Ct. App. March 15, 2024) 100 Cal.App.5th 825, review granted. (Exhibit G.)

The Court also GRANTS this request and takes judicial notice of the above.

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 MBUSA, they have a certified lemon arbitration program in place.

MBUSA is a nonsignatory to the arbitration agreement, although one of its authorized dealers is a signatory to the agreement upon which MBUSA’s motion rests, and Plaintiffs are a party to that same arbitration agreement. But MBUSA is expressly named as a third-party beneficiary of the Plaintiff’s lease agreement with the dealer, which makes this a different analysis than the judicially noticed appellate cases pending review before the California Supreme Court.

B. Discussion

i. 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, Plaintiffs argue that MBUSA is not a party to the agreement as the agreement is between Plaintiffs and the dealership, not MBUSA. Thus, Plaintiffs assert that Felisilda is factually and procedurally distinguishable from the case at bar, that equitable estoppel does not apply, and that MBUSA is not a third-party beneficiary. The Lease Agreement states as follows:

“IMPORTANT ARBITRATION DISCLOSURES”

Any claim or dispute, whether in contract, tort or otherwise (including any dispute over the interpretation, scope, or validity of this lease, arbitration section or the arbitrability of any issue), between you and us or any of our employees, agents , successors, assigns, or the vehicle distributor, including Mercedes-Benz USA LLC (each a “Third-Party Beneficiary”), which arises out of or relates to a credit application, this lease, or any resulting transaction or relationship arising out of this lease (including any such relationship with third parties who do not sign this contract) shall, at the election of either you, us, or a Third Party Beneficiary, be resolved by a neutral, binding arbitration and not by a court action. (

Further the arbitration provision provides:

This lease evidences a transaction involving interstate commerce. Any arbitration under this lease shall be governed by the Federal Arbitration Act (9 USC 1, et seq).

(Declaration of Ali Ameripour (“Ameripour Decl.”), Exhibit 2.)

Here, the Court finds that MBUSA 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].”].)

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.

ii. Third Party Beneficiary

First, MBUSA 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, MBUSA argues that it is a member of the class of persons for whose benefit the contract was made. As noted above, the Lease states:

“Any claim or dispute, whether in contract, tort or otherwise (including any dispute over the interpretation, scope, or validity of this lease, arbitration section or the arbitrability of any issue), between you and us or any of our employees, agents , successors, assigns, or the vehicle distributor, including Mercedes-Benz USA LLC (each a “Third-Party Beneficiary”), which arises out of or relates to a credit application, this lease, or any resulting transaction or relationship arising out of this lease (including any such relationship with third parties who do not sign this contract) shall, at the election of either you, us, or a Third-Party Beneficiary, be resolved by a neutral, binding arbitration and not by a court action.”

(Ameripour Decl., Exhibit 2, page 4.)

In Martha Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324, the Second District 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 they twice specifically vested the right of enforcement in the purchaser and the dealer only. 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. As noted by the Second District, federal authority is not binding on this court, but a discussion of Ngo is persuasive, nonetheless.

This Court has determined that the Ninth Circuit ruling with respect to the law of arbitration is more persuasive, because the arbitration provision of the sales contract expressly states that any arbitration under that sales 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 is identical to the one at issue, was strictly limited to the dealership and the Plaintiff, but not BMW. (See Ngo, supra, at p. 948.) As such, BMW was not a party to the agreement, and its obligations to the Ngo family arose independently of the plaintiffs’ agreement with the dealership. (Id. at 949.) The Second District analyzed Ngo at length, ultimately reaching the conclusion that the Sales Contract in Ochoa did not benefit a vehicle manufacturer under Goonewardene for three fundamental reasons that the Court need not recite here.

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, the arbitration provision clearly includes that it applies to MBUSA. As such, this Court finds that Defendant MBUSA has shown that although it is a nonsignatory of the lease agreement, the inclusion of MBUSA in the arbitration clause would benefit defendant by allowing these claims to be resolved by arbitration. Further, the inclusion of MBUSA as a party who may pursue a claim in arbitration shows that the parties indeed provide a benefit. Lastly, under the arbitration clause MBUSA 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.

iii. Equitable Estoppel

MBUSA also argues that it can enforce the arbitration provision under the doctrine of 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.) MBUSA’s motion relies on Felisilda and the First District’s reasoning on the equitable estoppel exception to the non-signatory rule. However, there has been a recent conflict in the Court of Appeal in Lemon Law litigation as to the enforceability of an arbitration agreement by a non-signatory manufacturer to the dealer’s contract containing the arbitration provision. The Court need not resolve this conflict because it is predicating its tentative ruling on the third-party beneficiary exception to the non-signatory rule, and therefore need not reach the equitable estoppel exception.

Because the Arbitration Agreement’s inclusion of MBUSA as a third-party beneficiary distinguishes this cause from Felisilda and Ochoa, the Arbitration Agreement may be enforced by MBUSA.

IV. CONCLUSION¿¿

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For the foregoing reasons, MBUSA’s Motion to Compel Arbitration is GRANTED.

MBUSA is ordered to give notice.