Judge Teresa A. Beaudet, Case 22STCV27069 2023-03-14 Tentative Ruling

In the Complaint, Plaintiff alleges that he leased a new 2020 BMW 7 Series VIN: WBA7T4CO8LCD65764 (the “Subject Vehicle”). (Compl., ¶ 8.) Plaintiff alleges the Subject Vehicle was delivered to Plaintiff with serious defects and nonconformities to warranty, and developed other serious defects and nonconformities. (Compl., ¶ 9.)

Defendant now moves to compel arbitration of this action and to stay the action while the motion to compel arbitration is pending and until arbitration is completed. Plaintiff opposes.

The Court grants Defendant’s request for judicial notice as to Exhibit A and denies the request as to B attached to the Declaration of Abtin Amir. The Court denies the request for judicial notice as to Exhibits 1-15 attached to the request.

The Court grants Defendant’s request for judicial notice as to Exhibit A attached to the Declaration of Megan Jacoby.

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. Securities Corp. (1996) 14 Cal.4th 394, 413-414.)

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. (Code Civ. Proc., § 1281.2; Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

Defendant submits evidence that Plaintiff leased the Subject Vehicle on November 6, 2020, from Bob Smith BMW pursuant to a written “BMW Financial Services NA, LLC – Lease Agreement” (the “Lease Contract”). (Jacoby Decl., ¶ 3, Ex. A.)

The Lease Contract contains an arbitration clause which states in pertinent part: “NOTICE: Either you or I may choose to have any dispute between us decided by arbitration and not in a court or by jury trial.” (Jacoby Decl., ¶ 3, Ex. A, § 38.) The Lease Contract further provides as follows:

“‘Claim’ broadly means any claim, dispute or controversy, whether in contract, tort, statute or otherwise, whether preexisting, present or future, between me and you or your employees, officers, directors, affiliates, successors or assigns, or between me and any third parties if I assert a Claim against such third parties in connection with a Claim I assert against you, which arises out of or relates to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease). Any Claim shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Jacoby Decl., ¶ 3, Ex. A, § 38.)[1]

Plaintiff’s causes of action fall within the broad scope of this arbitration clause because the causes of action relate to the purchase and condition of the Subject Vehicle. (See Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 [noting that “arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question”].)

The disposition of this motion turns on whether Defendant, a nonsignatory to the Sale Contract, may compel Plaintiff to arbitrate his claims pursuant to this arbitration clause. Defendant contends that two nonsignatory theories support its motion: (1) third party beneficiary and (2) equitable estoppel. Because the Court concludes that the equitable estoppel doctrine applies, the Court need not address the merits of Defendant’s third party beneficiary theory.

Under the doctrine of equitable estoppel, “a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims 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.) The doctrine applies in either of two circumstances: (1) when the signatory must rely on the terms of the written agreement containing the arbitration clause in asserting its claims against the nonsignatory or (2) when the signatory alleges “substantially interdependent and concerted misconduct” by the nonsignatory and a signatory and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218-219.) At bottom, “[t]he linchpin for equitable estoppel is equity—fairness.”” (Id. at p. 220.)

In Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 490, the California Court of Appeal examined a very similar arbitration clause which stated in pertinent part: “[A]ny claim or dispute, whether in contract, tort, statute or otherwise … between you and us … which arises out of or relates to … [the] 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 … be resolved by neutral, binding arbitration and not by a court action.” The appellate court found that the equitable estoppel doctrine applied: “The [buyers’] claim against [the manufacturer] directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract. Because the [buyers] expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — they are estopped from refusing to arbitrate their claim against [the manufacturer]. Consequently, the trial court properly ordered the [buyers] to arbitrate their claim against [the manufacturer].” (Id. at pp. 496-497.)

Defendant contends that the equitable estoppel doctrine applies here, as established in Felisilda. The Court agrees. As Defendant notes, this arbitration agreement is not materially different from the one examined in Felisilda. In this case, like the buyers’ claims in Felisilda, Plaintiff’s claims against Defendant “directly relate[] to the condition of the vehicle that [allegedly] violated warranties [Plaintiff] received as a consequence of the [Lease Contract].”

(Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 497.) Because Plaintiff “expressly agreed to arbitrate claims arising out of the condition of the vehicle — even against third party nonsignatories to the sales contract — [Plaintiff is] estopped from refusing to arbitrate [his] claim against [Defendant].” (Ibid.) As such, the Court must reach the same result here.

Defendant also asserts that its “entitlement is even stronger here than in Felisilda because Plaintiff here also explicitly agreed to arbitrate claims arising out of the condition of the vehicle against ‘affiliates.’” (Mot. at p. 19:17-19.) As set forth above, the arbitration clause here provides that “‘Claim’ broadly means any claim, dispute or controversy…between me and you or your employees, officers, directors, affiliates, successors or assigns…which arises out of or relates to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease). Any Claim shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Jacoby Decl., ¶ 3, Ex. A, § 38, emphasis added.) Section 2 of the Lease Contract provides, inter alia, that “[u]nless otherwise specified, ‘I,’ ‘me’ and ‘my’ refer to the Lessee and ‘you’ and ‘your’ refer to the Lessor or the Lessor’s assignee.” (Jacoby Decl., ¶ 3, Ex. A, § 2, emphasis added.)[2] Section 2 also provides that “‘Assignee’ refers to BMW Financial Services NA, LLC…” (Jacoby Decl., ¶ 3, Ex. A, § 2.) Defendant states that it and BMW Financial Services, NA, LLC are affiliates of one another. (Amir Decl., ¶ 3, Ex. B, Weight Decl., ¶ 3.)

In the opposition, Plaintiff asserts that Felisilda is distinguishable because the selling dealership here (Bob Smith BMW) has not moved to compel arbitration and is not a party to this action. This distinction is without a meaningful difference. The reasoning in Felisilda for upholding the equitable estoppel finding was that the buyers’ claims related to the condition of the subject vehicle and the buyers expressly agreed to arbitrate their claims arising out of the condition of the subject vehicle, including those against third party nonsignatories to the sales contract. This same finding has been made here as to the subject Lease Contract. In addition, in Felisilda, after the dealership was dismissed, the Felisildas and FCA proceeded to arbitrate the matter. (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 491.) Because the Felisildas expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – they were estopped from refusing to arbitrate their claim against FCA. (Id. at p. 497.) As set forth above, the arbitration clause here provides that “‘Claim’ broadly means any claim, dispute or controversy…between me and you or your employees, officers, directors, affiliates, successors or assigns…which arises out of or relates to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease). Any Claim shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Jacoby Decl., ¶ 3, Ex. A, § 38, emphasis added.)

As Defendant notes, Plaintiff also relies on a number of nonbinding federal cases in support of his assertion that the doctrine of equitable estoppel does not apply here.

In sum, the equitable estoppel doctrine applies and enables Defendant to compel Plaintiff to arbitrate his claims against Defendant.

For the foregoing reasons, Defendant’s motion to compel arbitration is granted. The entire action is stayed pending completion of arbitration of Plaintiff’s arbitrable claims.

The Court sets an arbitration completion status conference on _______________ 2023, at 10:00 a.m. in Dept. 50. The parties are ordered to file a joint report regarding the status of the arbitration five court days prior to the status conference, with a courtesy copy delivered directly to Department 50.

[1]Plaintiff acknowledges in the opposition that “[a] copy of the written lease…which I executed in relation to the vehicle that is the subject of my Complaint in this action is attached as Exhibit ‘A’ to the Declaration of Meghan [sic] Jacoby…” (Yashar Decl., ¶ 3.)

[2]Section 41 of the Lease Contract provides, inter alia, that “[b]y signing below, Lessor…assigns all right, title, and interest in the Vehicle and this Lease to the Assignee listed in Section 2 above.” (Jacoby Decl., ¶ 3, Ex. A, § 41.)

FARSHAD BRYAN YASHAR, Plaintiff, vs. BMW OF NORTH AMERICA, LLC, et al., Defendants.	Case No.:	22STCV27069
	Hearing Date:	March 14, 2023
	Hearing Time:	10:00 a.m.
	[TENTATIVE] ORDER RE: DEFENDANT BMW OF NORTH AMERICA, LLC’S MOTION TO COMPEL ARBITRATION AND TO STAY ALL PROCEEDINGS

Superior Court of California

County of Los Angeles

Department 50