Judge: Salvatore Sirna, Case: 22PSCV00671, Date: 2023-01-23 Tentative Ruling
The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.
Case Number: 22PSCV00671 Hearing Date: January 23, 2023 Dept: G
Defendants Nissan North America, Inc.’s Motion to
Compel Arbitration and Stay Proceedings
Respondent: Plaintiff Benjamin Valle
TENTATIVE RULING
Defendants Nissan North America, Inc.’s Motion to Compel Arbitration and Stay Proceedings is GRANTED. Proceedings are STAYED pending the outcome of arbitration.
BACKGROUND
This is a lemon law action. On October 25, 2021, Plaintiff Benjamin Valle purchased a new 2021 Nissan Versa and alleges express warranties from Defendant Nissan North America, Inc. accompanied the sale, including that Defendant undertook to preserve or maintain the utility or performance of Plaintiff’s vehicle and provide compensation if there was a failure in such utility or performance. Plaintiff alleges the vehicle has serious defects and nonconformities including electrical, engine, and transmission system defects.
On June 30, 2022, Plaintiff filed a complaint against Defendant and Does 1-10, alleging (1) violation of the Song-Beverly Act – breach of express warranty, (2) violation of the Song-Beverly Act – breach of implied warranty, and (3) violation of the Song-Beverly Act section 1793.2.
On November 28, 2022, Defendant filed the present motion. A hearing is set for January 23, 2023. A final status conference is set for July 11 and a jury trial is set for July 25.
REQUEST FOR JUDICIAL NOTICE
The court GRANTS Plaintiff’s request for judicial notice of Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942.
ANALYSIS
Defendant argues Plaintiff’s complaint is subject to a valid and binding arbitration agreement. For the following reasons, the court agrees.
“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.” (Code Civ. Proc., § 1281.) The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.)
“[T]he moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the opposing party bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)
Existence of an Arbitration Agreement
Under the Federal Arbitration Act (FAA), the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)
In this case, Defendant claims Plaintiff entered into a binding arbitration agreement when Plaintiff purchased Plaintiff’s vehicle from Surf City Nissan. The Defendant notes the sales contract included the title “Retail Installment Sale Contract – Simple Finance Charge (with Arbitration Provision)” and points to an arbitration provision on the second page of the sales contract. (Marden Decl., Ex. B.) In relevant part, the arbitration provision states as follows:
“Any claim or dispute, whether in contract, tort,
statute or otherwise (including the interpretation and scope of 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) shall, at your
or our election, be resolved by neutral, binding arbitration and not by a court
action.” (Marden Decl., Ex. B, p. 7.)
The
court notes Defendant was not a signatory to the arbitration provision, which
was part of a sales contract between Plaintiff and Surf City Nissan. However, “there
are six theories by which a non-signatory may be bound to arbitrate: ‘(a)
incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or
alter ego; (e) estoppel; and (f) third-party beneficiary’ [Citations].” (Suh
v. Superior Court (2010) 181 Cal.App.4th 1504, 1513, quoting 2 Oehmke,
Commercial Arbitration (3d ed. 2006 update) § 41.57 at p. 41-195.) Defendant claims
the right to enforce the arbitration provision under equitable estoppel and as
a third-party beneficiary.
Validity
As an initial matter, the court addresses whether Defendant has established the existence of an arbitration agreement. To establish prima facie evidence of an arbitration agreement, the party moving for arbitration need only provide a copy of the arbitration provision that purports to be signed by the parties or set forth the agreement’s terms in the motion. (Gamboa, supra, 72 Cal.App.5th at p. 165.) The moving party is not required “to follow the normal procedures of document authentication.” (Ibid, quoting Condee, supra, 88 Cal.App.4th at p. 218.) The opposing party “bears the burden of producing evidence to challenge the authenticity of the agreement” and can do so with statements under oath. (Ibid.) If the opposing party meets their burden, the moving party must then establish a valid arbitration with admissible evidence by preponderance of the evidence. (Ibid.)
Here, Defendant set forth the agreement’s terms verbatim in Defendant’s motion and attached a copy of the provision in a supporting declaration. (Motion, p. 9-10; Marden Decl., Ex. B.) Plaintiff does not contest or provide any evidence challenging the authenticity of this agreement. Accordingly, the court finds an arbitration agreement exists.
Equitable Estoppel
The court next addresses whether the arbitration agreement is applicable to this action under equitable estoppel. Under equitable estoppel, “a non-signatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the non-signatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.” (Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 271.) A signatory’s claims are intertwined with the agreement containing the arbitration provision if “based on the same facts and are inherently inseparable from arbitrable claims against signatory defendants.” (Turtle Ridge Media Group, Inc. v. Pacific Bell Directory (2006) 140 Cal.App.4th 828, 833, quoting Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713-1714.)
In arguing Plaintiffs’ claims are intertwined with their obligations under the sales contract, Defendants cite Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda) as binding authority. In Felisilda, the court held a non-signatory automobile manufacturer could compel plaintiffs in a lemon law action to arbitration because the sales contract expressly required arbitration for “claims arising out of the condition of the vehicle – even against third party non-signatories to the sales contract.” (Id., at p. 497.) The court noted plaintiffs’ lemon law claim “directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Ibid.)
Here, the court finds Felisilda applicable and controlling. The arbitration provision between Plaintiff and Surf City Nissan covers any claim or dispute “which arises out of or relates to your . . . purchase or condition of this vehicle.” (Marden Decl., Ex. B, p. 7.) In Felisilda, the court noted plaintiffs established the sales contract was the source of the warranties at issue in that case because plaintiffs pled “that ‘express warranties accompanied the sale of the vehicle to [them] by which [manufacturer] . . . undertook to preserve or maintain the utility or performance of [their] vehicle or provide compensation if there was a failure in such utility or performance.” (Id., at p. 496.)
In Plaintiff’s complaint, Plaintiff’s lemon law claims “arise out of warranty and repair obligations of [Defendant] in connection with a vehicle Plaintiff purchased and for which [Defendant] issued a written warranty.” (Complaint, ¶ 4.) Like Felisilda, Plaintiff’s claims arise from warranties that accompanied the sale of the vehicle under the sales contract. Also, both cases involve an arbitration agreement that explicitly applies to claims involving the condition of the vehicle, including third-parties.
Plaintiff responds that the Ninth Circuit recently distinguished Felisilda in Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950 (Ngo). In Ngo, the Ninth Circuit held a non-signatory manufacturer could not compel arbitration of lemon law claims under equitable estoppel. (Id., at p. 948.) While the manufacturer argued Felisilda broadened equitable estoppel under California law, the Ninth Circuit disagreed. (Id., at p. 950.) Instead, the court distinguished Felisilda on the grounds that plaintiff there had brought suit against both the signatory dealership and non-signatory manufacturer and the signatory dealership was the one who sought to compel arbitration. (Ibid.) The court contrasted that case with the facts in Ngo where the non-signatory manufacturer was the only party sued and sought to compel arbitration on its own.
Even when interpreting the FAA, federal circuit decisions are only persuasive at best. (See Metalclad Corp. v. Ventana Environmental Organization Partnership (2003) 109 Cal.App.4th 1705, 1714-1715.) Furthermore, Ngo’s attempt to distinguish Felisilda is a distinction without a difference. In fact, Felisilda rejected a federal court decision that declined to enforce an arbitration agreement against a non-signatory manufacturer where the manufacturer was the only defendant. (Compare Felisilda, supra, 53 Cal.App.5th at p. 498, with Jurosky v. BMW of North America, LLC (S.D. Cal. 2020) 441 F.Supp.3d 963, 966, 972 (Jurosky).) The court in Felisilda noted Jurosky glossed “over language in an arbitration clause that expressly includes third party non-signatories” as is the case here. (Felisilda, supra, 53 Cal.App.5th at p. 498.)
Thus, the court rejects Plaintiff’s arguments that Felisilda should be distinguished and finds Defendant has established the arbitration provision’s applicability to this action through equitable estoppel. Accordingly, the court need not address whether Defendant can also enforce the arbitration provision as a third-party beneficiary.
Waiver
As a defense to the enforcement of the arbitration agreement, Plaintiff argues Defendant has waived the right to compel arbitration. The court disagrees.
While a petition to compel arbitration may be denied on grounds of waiver, waiver is not lightly inferred due to the strong policy favoring arbitration and “the party seeking to establish a waiver bears a heavy burden of proof.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.) In determining whether waiver has occurred, courts consider “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 964 (Davis), quoting Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464, 467-468.) However, in light of the U.S. Supreme Court’s decision in Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708 (Morgan), courts no longer consider the sixth factor looking at prejudice. (Davis, supra, 84 Cal.App.5th at p. 966.)
In this case, Plaintiff argues Defendant’s actions are inconsistent with the right to arbitrate because Defendant delayed initiating arbitration for nearly six months and engaged in discovery with the “sole purpose . . . to stonewall Plaintiff’s ability to litigate this matter.” However, according to the exhibits provided by Plaintiff, only Plaintiff propounded discovery in this case, including form interrogatories, requests for admission, requests for production, and special interrogatories on August 31, 2022. (Amarkarian Decl., ¶ 10, Ex. 6) On October 14, Plaintiff sent a notice for deposition and deposition subpoenas for personal appearance and production (Amarkarian Decl., ¶ 12, Ex. 8). On November 11, Plaintiff sent a notice for a deposition. (Amarkarian Decl., ¶ 11, Ex. 7) Plaintiff did not provide any evidence of Defendant responding to Plaintiff’s discovery requests.
As support, Plaintiff relies on Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436 (Lewis), and Adolph v. Coastal Auto Sales, Inc. (2010) 184 Cal.App.4th 1443 (Adolph). However, both of these cases are distinguishable. In Lewis, waiver was established even though compelling party did not propound discover because the party (1) responded to four sets of discovery without raising the arbitration provision as a potential bar, (2) forced propounding party to file three motions to compel, and (3) litigated the merits of the case through two demurrers and a motion to strike. (Lewis, supra, 205 Cal.App.4th at p. 449.) In Adolph, the compelling party refused to cooperate with discovery and brought demurrers. (Adolph, supra, 184 Cal.App.4th at p. 1452.)
Here, Plaintiff provides no evidence regarding Defendant’s level of participation in discovery. Unlike Lewis and Adolph, Plaintiff has not filed any motions to compel discovery. Furthermore, Defendant has not filed any demurrers or motions to strike. The only filings submitted in this case by Defendant after Defendant was served on July 5, 2022, are an answer filed August 4, a case management statement filed October 13 that stated a desire for binding private arbitration and a plan to file the present motion, and the present motion to compel arbitration filed November 28.
Based on these facts, the court cannot say Defendant’s actions were in any way inconsistent with the right to arbitrate. Lastly, while Plaintiff also attempts to argue this motion to compel arbitration prejudices Plaintiff, Morgan already makes clear that in interpreting agreements under the FAA, courts only look at the conduct of the compelling party and do not consider prejudice. (Morgan, supra, 142 S.Ct. at p. 1713-1714.) Thus, the court finds Plaintiff has failed to establish Defendant’s waiver of the right to arbitrate.
Accordingly, because Defendant established the existence and applicability of an arbitration agreement while Plaintiff failed to establish waiver, the court GRANTS Defendant’s motion.
CONCLUSION
Based on the foregoing, Defendant’s motion to compel arbitration is GRANTED. This action is STAYED pending completion of arbitration.
The court will set an OSC re: Arbitration Completion at the hearing on January 23, 2023.