Judge: Stephen Morgan, Case: 22AVCV00554, Date: 2023-01-31 Tentative Ruling

Case Number: 22AVCV00554    Hearing Date: January 31, 2023    Dept: A14

Background

This is a Lemon Law action. Plaintiffs Luis Angel Gutierrez (“Gutierrez”) and Ines Martinez Santiago (“Santiago” and collectively “Plaintiffs”) allege that on December 19, 2021, they purchased a 2021 Nissan Kicks having VIN No. 3N1CP5DV8ML563529 (the “Vehicle”) from which was delivered to Plaintiffs with serous defects and nonconformities to the warranty from Defendant Nissan North America, Inc. (“Defendant”).

On August 03, 2022, Plaintiffs filed their Complaint alleging four causes of action for: (1) Violation of Song-Beverly Act – Breach of Express Warranty, (2) Violation of Song-Beverly Act – Breach of Implied Warranty; (3) Violation of the Song-Beverly Act § 1793.2(b), and (4) Violation of the Song-Beverly Act § 1973.22 – Tanner Consumer Protection Act.

On September 09, 2022, Defendant filed its Answer.

On November 03, 2022, Defendant filed this Motion to Compel Arbitration.

On November 30, 2022, Plaintiffs filed their Opposition.

On December 06, 2022, Defendant filed its Reply.

On December 13, 2022, a hearing was held on the matter. The Court inquired as to one of the significant arguments that both parties had – whether the arbitration in the warranty agreement or sales contract applied. Counsels presented oral argument. The hearing was continued to January 12, 2023.

On December 19, 2022, the Court reset the hearing to January 31, 2023.

There have been no new filings.

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Analysis

Legal Standard – California law incorporates many of the basic policy objectives contained in the Federal Arbitration Act, including a presumption in favor of arbitrability. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-72.) Cal. Code¿Civ.¿Proc.¿§ 1281.2 permits a party to file a motion to request that the Court order the parties to arbitrate a controversy. Under Cal. Code¿Civ.¿Proc.¿section 1281.2, the Court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or

(b) Grounds exist for the revocation of the agreement.

(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.

(Cal. Code¿Civ.¿Proc.¿§ 1281.2.)

¿¿

A second statute creates further impositions for arbitration for uninsured or underinsured motor vehicles: “The policy or an endorsement added thereto shall provide that the determination as to whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof, shall be made by agreement between the insured and the insurer or, in the event of disagreement, by arbitration. The arbitration shall be conducted by a single neutral arbitrator. . .” (Cal. Ins. Code § 11580(f).) 

Doubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration.¿(Id.)¿The Court should order them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the dispute.¿(Id., Cal. Code Civ. Proc. §1281.2 [“. . .unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement”].)¿Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator.¿(Id.)¿¿¿ 

¿¿ 

The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract.¿(Id.)¿There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate.¿(Id.)¿¿ 

¿¿ 

The party seeking to enforce the arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence.¿(Giuliano v. Inland Empire Personnel, Inc.¿(2007) 149 Cal.App.4th 1276, 1284.)¿The trial court first decides whether an enforceable arbitration agreement exists between the parties and then¿determine whether the plaintiff’s claims are covered by the agreement.¿(Omar v. Ralphs Grocery Co.¿(2004) 118 Cal.App.4th 955, 961.)¿¿ 

¿¿ 

The party opposing the petition to compel arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.¿(Giuliano v. Inland Empire Personnel, Inc.,¿supra,¿at¿1284.)¿In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.¿(Id.) 

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Discussion

Application – Premiere Defendants seek to compel Plaintiffs to arbitration to resolve the action.

Under both the Federal Arbitration Act (“FAA”) and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.) The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.)

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.) However, if the existence of the agreement is challenged, "petitioner bears the burden of proving [the arbitration agreement's] existence by a preponderance of the evidence." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. See also Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1058-1060.)

“With respect to the moving party's burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court. (See Condee, supra, 88 Cal.App.4th 215, 218; see also Cal. Rules of Court, Rule 3.1330 [“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference”].) Once such a document is presented to the court, the burden shifts to the party opposing the motion to compel, who may present any challenges to the enforcement of the agreement and evidence in support of those challenges. [Citation]” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Here, Defendant presents that Plaintiffs entered into a Retail Installment Sales Contract (“RISC”) which contained a broad arbitration agreement, including a provision to arbitrate any claim or dispute arising out of the purchase or condition of the vehicle. Plaintiff relies on Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (“Felisilda”), among other cases, to support its argument. Defendant argues that Felisilda allows a non-signatory such as Defendant to compel arbitration and that equitable estoppel prevents Plaintiffs from avoiding their obligations to arbitrate where, as here, their claims are intimately founded in, and intertwined with, their sales contract and the purchase and the condition of their vehicle

Plaintiffs present that this action concerns Defendant’s warranty, not the RISC. Specifically, the Warranty Agreement that came with the Vehicle provides for a voluntary mediation arbitration program provided by the BBB. Plaintiffs argue that (1) should arbitration be compelled it should be through the arbitration method provided within the Warranty Agreement, and (2) Defendant may not enforce the arbitration under the doctrine of equitable estoppel as a nonsignatory. Plaintiffs argue that Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 and Corporation of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 hold that a warranty is separate from a sales contract; Ngo v. BMW of North America (9th Cir. 2022) 23 F.4th 942 (“Ngo”) and Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122 hold that a manufacturer’s warranty is independent of the purchase agreement; and Plaintiffs believe that Defendant inaccurately characterizes Felisilda as it is distinguished from the case at hand.

Defendant’s Reply reiterates that Felisilda applies. Defendant also rebuts Plaintiffs’ argument that the RISC is separate from the warranty, citing to A.A. Baxter Corp. v. Colt Indus., Inc. (1970) 10 Cal.App.3d 144 (“A.A. Baxter”), and Plaintiffs’ argument that equitable estoppel does not apply, see Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187 and A.A. Baxter, supra, and Felisilda.

The question before the Court, presented by the parties, is not whether there is an enforceable arbitration agreement, but whether the enforceable arbitration agreement within the RISC applies to Defendant as a nonsignatory.

The Court inquired at the hearing. Defense counsel directed the Court to Felisilda. Plaintiffs’ counsel argues that the arbitration that applies to Defendant is that of the Warranty and not that of the RISC. Plainitffs’ counsel cited to 9th. Cir. cases.

As an initial matter, federal precedent is persuasive and not binding. This Court is bound by California case precedent.

1. RISC Warranty

The Court has looked to the cited case law.

Although A.A. Baxter Corp. states: “A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking. (Calpetro Producers Syndicate v. C.M. Woods Co., 206 Cal. 246, 251 [274 P. 65]; Rutherford v. Standard Engineering Corp., 88 Cal.App.2d 554, 565 [199 P.2d 354].)” (A.A. Baxter, supra, 10 Cal.App.3d 144, 153), its facts are different from those in this instant action. In A.A. Baxter Corp., the issue before the appellate court was one of whether the theory of warranty as to the time of delivery gave rise to a theory of negligent misrepresentation.

There is a line of cases specifically relating to manufacturers:

As an initial matter, under California law, warranties from a manufacturer that is not a party to a sales contract are "not part of [the] contract of sale." Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh, 217 Cal. App. 2d 492, 514, 32 Cal. Rptr. 144 (Cal. Ct. App. 1963); see also Greenman v. Yuba Power Prods., Inc., 59 Cal. 2d 57, 63-64, 27 Cal. Rptr. 697, 377 P.2d 897 (Cal. 1963). Instead, the express and implied warranties arise "independently of a contract of sale." Greenman, 59 Cal. 2d at 60-61; Cavanaugh, 217 Cal. App. 2d at 514; see also Frost v. LG Elecs. MobileComm U.S.A., Inc. No. D062920, 2013 Cal. App. Unpub. LEXIS 6955, 2013 WL 5409906, at *6 (Cal. Ct. App. Sept. 27, 2013) (a manufacturer's warranties are "independent of the purchase agreement").

(Ngo, supra, 23 F.4th 942 at 949 (“Ngo”).)

The arbitration agreement reads, in pertinent part:

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATIONS.

Any claim or dispute, whether in contract, tort, statute or otherwise (including 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 off 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 and binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association, 1633 Broadway, 10th Floor, New York, New York 10019 (www.adr.org), or any other organization to conduct the arbitration subject to our approval. You may get a copy of the rules of an arbitration organization by contacting the organization or visiting the website.

(Exh. B at p. 5.)

It is clear that third party litigation, such as this one, was anticipated. However, arbitration provision does not give any third parties the right to elect arbitration. Instead, the provision limits such a decision to the buyer, Plaintiff, and the dealer, stating that any covered claims "shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action." (Ibid.) As noted above, "your" refers to Plaintiff and "ou describes "the Seller - Creditor," that is, the dealer, not the manufacturer. (Exh. B at p. 1.) Defendant does not claim to be an "employee, agent, successor or assign" of the dealer.

1. Third-Party Beneficiary

A non-signatory is a third-party beneficiary only to a contract “made expressly for [its] benefit.” (Cal. Civ. Code § 1559.) Defendant was obligated to prove that (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." Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.

Defendant’s argument for its ability to compel as a third-party beneficiary is that a warranty relationship was created by Defendant and Plaintiffs, memorialized by the RISC, and that the arbitration provision embraces the claims that Plaintiffs assert against Defendant.

However, as analyzed above, the RISC does not include or memorialize any agreement with the manufacturer. Thus, Defendant’s argument fails not only to persuade the Court that the RISC includes the warranty agreement, but also to establish the necessary factors needed to find that Defendant is a third-party beneficiary.

1. Equitable Estoppel

A nonsignatory party seeking to enforce an arbitration agreement under the doctrine of equitable estoppel must establish a close relationship between the signatory and nonsignatory parties. (Jarboe v. Hanlees Auto Group (2020) 53 Cal.App.5th 539, 552-53.) The doctrine of equitable estoppel applies if (1) the plaintiff relies upon the contract's terms in asserting claims against the non-signatory defendant, or those claims are “intimately founded in or intertwined with” the contract itself, or (2) if the plaintiff alleges “substantially interdependent and concerted misconduct” by the defendant, where such allegations of misconduct are "founded in or intimately connected with" the obligations of the contract. (Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 221 (“Goldman”).) The rule allowing a nonsignatory to enforce an arbitration agreement on equitable estoppel grounds is based on the principle that a party should be precluded “ ‘from asserting rights “he otherwise would have had against another” when his own conduct renders assertion of those rights contrary to equity.’ ” (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713 [Citations omitted].)

In this case, the signatory Plaintiffs have sued nonsignatory Defendant for warranty claims based on a written warranty and the protections of the Song-Beverly Act. Plaintiffs attached the relevant warranty to the complaint and specifically alleges that the claims against Defendant NNA “arise out of the warranty obligations of NISSAN NORTH AMERICA, INC. in connection with a vehicle purchased by Plaintiffs and for which NISSAN NORTH AMERICA, INC. issued a written warranty.” (Complaint ¶ 4.) The warranty relied on is not the sales Agreement with the dealer that contains the arbitration provision, but rather the owner's manual for Plaintiffs' vehicle which was issued by Defendant as a manufactuer (Decl. Michael Oppenheim, Exh. B.)

Under Goldman, the fact that Plaintiffs obtained the vehicle that is under warranty via an installment sales contract is insufficient to advance an equitable estoppel contention. (See also Ngo, supra, 23 F.4th at 949 [mere ownership through the purchase agreement does not reflect an intention to enforce any obligations of that agreement against the manufacturer]; Ruderman v. Rolls Royce Motor Cars (C.D. Cal. 2021) 511 F.Supp.3d 1055, 1059-1060 [arbitration will not be compelled where the plaintiff's claims do not seek enforcement of sales contract, only the fact that he purchased the vehicle]; Goldman, supra, 173 Cal. App. 4th at p. 219 [because the sales contracts involve interstate commerce, as defined in the Federal Arbitration Act, federal law governs interpretation so federal court decisions are persuasive authority].)

Felisilda is also distinguishable as the defendant dealership moved for arbitration, arbitration was granted, then plaintiffs dismissed the dealership. (See Felisilda, supra, 53 Cal.App.5th 486 [generally].) As such, it is unpersuasive to this instant action.

Accordingly, the Motion to Compel Arbitration is DENIED.

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1. Warranty Arbitration

The arbitration provision under the warranty reads:

In the event that you believe Nissan has been unable to satisfactorily address the issue with your vehicle, a special automotive complaint resolution program called BBB AUTO LINE is available to you. The BBB AUTO LINE program is independently operated by the Council of Better Business Bureaus, Inc. (BBB). For information about the BBB AUTO LINE in your area, please call us (Nissan) at the same toll free number 1-800-NISSAN-1 (1-800-647-7261). We will be happy to provide you with information about BBB AUTO LINE. Or, you may contact the BBB directly at:

BBB Auto Line Council of Better Business Bureaus, Inc.

3033 Wilson Blvd., Suite 600 Arlington,

VA 22201

1 (800) 955-5100

If you call the BBB, its staff will take down details of your complaint by telephone. They will ask for the same information as described in Step 2. The BBB AUTO LINE program consists of two parts, mediation and arbitration.

The BBB will attempt to assist you to resolve the problem during mediation. If a satisfactory resolution has not been achieved during mediation, you will have the opportunity to personally present your case before an impartial arbitrator or three-person panel. The arbitrator(s) will make a decision after the arbitration hearing.

The BBB will, in most cases, send you a final decision within forty (40) days (plus 7 if you have not contacted the proper person from the dealership or Nissan) unless you delay the process. If you do not accept the decision, it will not be legally binding on you or Nissan. However in some states, if the decision is not accepted, it may be introduced either by you or by Nissan, as evidence in any potentially related court action.

(Michael Oppenheim, Exh. B.)

This arbitration agreement does not mandate arbitration, but rather allows Plaintiffs to elect to resolve their complaint with the vehicle through arbitration.

Conclusion