Judge Stephen P. Pfahler, Case 22CHCV00685 2023-03-14 Tentative Ruling

Judge: Stephen P. Pfahler, Case: 22CHCV00685, Date: 2023-03-14 Tentative Ruling

Case Number: 22CHCV00685 Hearing Date: March 14, 2023 Dept: F49

Dept. F-49

Date: 3-14-23

Case #22CHCV00685

ARBITRATION

MOVING PARTY: Defendant, Nissan North America, Inc.

RESPONDING PARTY: Plaintiff, Noemi Delara

RELIEF REQUESTED

Motion to Compel Arbitration and Stay

SUMMARY OF ACTION

On December 31, 2018, plaintiff Noemi Delara purchased a new 2019 Nissan Altima vehicle from third party Universal City Nissan. Plaintiff alleges the vehicle was covered by warranties. On an unspecified date, the vehicle began experiencing problems with the electrical system, thereby causing the illumination of various monitoring systems in the vehicle and preventing volume adjustment of the radio. After a certain number of repair attempts the vehicle continues to present the malfunctions.

On August 25, 2022, Plaintiff filed a complaint for Breach of Written Warranty, Breach of Implied Warranty, and Song-Beverly Consumer Warranty Act. Nissan North America, Inc. answered the complaint on October 17, 2022.

RULING: Granted.

Defendant Nissan North America, Inc. (Nissan) moves to compel arbitration pursuant to the terms of the retail installment contract executed at the time of the acquisition of the vehicle. Nissan seeks arbitration on grounds that the claims arise from alleged defects with the vehicle. The “condition” of the vehicle is a term within the contract requiring arbitration. Nissan concedes it was not a signatory party to the agreement, but seeks enforcement of the agreement as a third party beneficiary responsible for the warranty provisions under both the terms of the contract and under case authority. Plaintiff in opposition presents multiple arguments: lack of a signatory party to the contract and beneficiary relationship; denial of any inextricably intertwined relationship between Nissan and Plaintiff regarding the warranty via the purchase contract; lack of consideration in the contract itself;, lack of express consent by Plaintiff to arbitrate the contract with Nissan; and, argument that the separate arbitration agreement from the purchase contract obfuscates the arbitration clause and violates the requirement of a “clear and concise” notice requirements for the warranty. Nissan in reply reiterates the basis of authority for a non-signatory beneficiary right to enforce an arbitration agreement, including the lack of any dispute with the contractual terms and conditions of the contract regarding arbitration for claims on the “condition” of the vehicle. Nissan also challenges any dispute to its right to compel arbitration as a non-signatory to the contract, and reiterates the equitable estoppel grounds for compelling arbitration as a non-signatory third party beneficiary.

“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.) “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such 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, 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.” (Code Civ. Proc., § 1281.2.)

The law creates a general presumption in favor of arbitration. In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

The court finds the declaration of counsel for defendant Nissan establishes and verifies the operative sales agreement. [Declaration of Jeck Dizon, Ex. B.] The Retail Installment Sales Contract includes a copy of an “Arbitration Provision.” Plaintiff acknowledges the existence of the agreement itself. The court therefore focuses on the challenges to the language and form of the agreement.

The clause appears as an independent page or document presumably presented at the time of the execution of the retail installment sale contract given the title of the undisputed agreement: “RETAIL INSTALLMENT SALES CONTRACT—SIMPLE FINANCE CHARGE (WITH ARBITRATION PROVISION).” The court therefore the agreements were executed in one transaction.

Plaintiff challenges the language of the contract and arbitration clause on grounds that the warranty itself lacks reference to the arbitration clause, thereby rendering it unclear. (Cunningham v. Fleetwood Homes of Georgia, Inc. (11th Cir. 2001) 253 F.3d 611, 621-622.) The contract itself references the potential for a manufacture warranty, and only disclaims any seller warranties, where applicable. Section 3 of the arbitration clause provides in relevant part: “Any claim or dispute, whether in contract, tort, statute or otherwise…which arises out of or relates to the your…purchase or condition of this vehicle…shall…be resolved by neutral binding arbitration.” The court finds no violation of the Magnuson-Moss statute in that the clause is integrated with the purchase contract and sufficiently references potential warranty repair issues through the arbitration reference to the “purchase and condition” of the vehicle. Said language clearly involves warranties granted by the manufacture, whether required as a matter of law (e.g. Civ. Code, § 1792) and/or provided as a purchase incentive. The motion otherwise lacks any challenge to enforceability on grounds the arbitration clause constitutes a substantively or procedurally unconscionable agreement.

The remaining issue is therefore the non-signatory/third party relationship of Nissan to the contract. The agreement itself is only executed by Universal City Nissan. Arbitration agreements may only be generally compelled by parties to the agreement. The doctrine of equitable estoppel allows for a non-signatory party to compel arbitration “‘when the causes of action against the nonsignatory are “intimately founded in and intertwined” with the underlying contract obligations.’” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237; Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495-496; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217-218; Crowley Maritime Corp. v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070 [Under equitable estoppel, a party cannot avoid participation in arbitration, where the party received “a direct benefit under the contract containing an arbitration clause…”]; Boucher v. Alliance Title Co, Inc. (2005) 127 Cal.App.4th 262, 271).)

Plaintiff in opposition seeks to distinguish the number of cases enforcing an arbitration clause by a third party based on based on the lack of any established third party beneficiary. (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 (“Ngo.”) “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.) The Ngo case involved BMW of North America seeking to compel arbitration over a dispute regarding the financing agreement, and found BMW of North America lacked any basis to compel arbitration as a third party beneficiary, due to the failure to establish any third party beneficiary status. (Ngo, supra, at p. 948.)

Unlike Ngo, the subject action involves both an equitable estoppel basis to compel, as well as a claim against the warranty(ies) provided by the manufacture of the vehicle itself—moving defendant Nissan. The Ngo court itself in fact distinguished claims between a credit financing agreement and warranty claims in finding the distinction between the claims. (Id. at pp. 948-950.) Again, the complaint itself seeks relief under express and implied warranties offered and required by the manufacturer of the vehicle. No other parties are alleged as responsible for adherence to the warranty. The claims against Defendant are therefore clearly “intertwined” with the terms of the contract regarding claims under contract, statute and/or tort. Plaintiff is equitably estopped from both seeking to enforce the warranties owed by the manufacturer, while denying the existence of contractual rights connected via the purchasing and financing agreement, thereby allowing acquisition of the vehicle and conveyance of warranty rights. The court therefore rejects the extensive arguments under Ngo on grounds that equitable estoppel compels arbitration of the warranty claims as to the lack of any third party beneficiary relationship barring arbitration. (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at pp. 495-498; JSM Tuscany, LLC v. Superior Court, supra, 193 Cal.App.4th at p. 1237; Goldman v. KPMG, LLP, supra, 173 Cal.App.4th at pp. 229-230.)

The action is therefore ordered to arbitration in compliance with the terms of the agreement. The parties are to select an arbitration organization, which may include the American Arbitration Association, or any other. Selection of the arbitrator shall proceed under the selected organization rules. If the parties cannot agree on an organization, the court orders the parties to submit a list of one to two organizations from each party, where the court will select the organization. If the selected organization itself lacks a method for selecting an arbitrator, the court will again accept one to two arbitrators from each party within the organization and select from the list. The parties have 30 days from the date of this order to begin the selection process.

“If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) The court orders the action stayed.

The court will set an OSC re: Status of Arbitration and Stay at the time of the hearing.

Nissan to provide notice.