Judge Thomas D. Long, Case 21STCV42134 2023-02-23 Tentative Ruling

On November 15, 2022, Plaintiff Guadalupe A. Medina filed this action against Defendant Nissan North America Inc., arising from Plaintiff’s purchase of an allegedly defective vehicle from a non-party dealership.

On November 2, 2022, Defendant filed a motion to compel arbitration and stay the action pending completion of arbitration.

Defendant asks the Court to take judicial notice of the complaint and answer in this action. The Court denies the request as irrelevant; the complaint and answer are already part of this case’s record.

Defendant also asks the Court to take judicial notice of the Notice of Entry of Dismissal and Proof of Service filed in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486. The request is granted. (Evid. Code, § 452, subd. (d) [court may take judicial notice of records of other courts].)

Plaintiff asks the Court to take judicial notice of the opinion in Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942. The request is granted. (Evid. Code, § 451, subd. (a) [court shall take judicial notice of the law of this state and of the United States].) However, the Court advises that such a request is unnecessary, as the case is published law.

Defendant’s Objection Nos. 1-3 are sustained. Orders denying motions to compel arbitration in other cases are irrelevant.

When seeking to compel arbitration of a plaintiff’s claims, the defendant must allege the existence of an agreement to arbitrate. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219.) The burden then shifts to the plaintiff to prove the falsity of the agreement. (Ibid.) After the Court determines that an agreement to arbitrate exists, it then considers objections to its enforceability. (Ibid.) The Court must grant a petition to compel arbitration unless the defendant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement. (Ibid.; Code Civ. Proc., § 1281.2.)

The parties do not dispute the existence of an arbitration agreement between Plaintiff and the non-party dealership, and Defendant provided the full sales contract containing the arbitration provision. (Wilner Decl., Ex. 4 [“Arbitration Agreement”].) Page 1 of the contract states in a box: “Agreement to Arbitrate. By signing below, you agree that, pursuant to the Arbitration Provision on the reverse side of this contract, you or we may elect to resolve any dispute by neutral, binding arbitration and not by a court action. See the Arbitration Provision for additional information concerning the agreement to arbitrate.” Plaintiff signed immediately under this language. Plaintiff also signed on page 6, under a notice that states: “YOU AGREE TO THE TERMS OF THIS CONTRACT. YOU CONFIRM THAT BEFORE YOU SIGNED THIS CONTRACT, WE GAVE IT TO YOU, AND YOU WERE FREE TO TAKE IT AND REVIEW IT. YOU ACKNOWLEDGE THAT YOU HAVE READ ALL PAGES OF THIS CONTRACT, INCLUDING THE ARBITRATION PROVISION ON PAGE 7 OTHER THIS CONTRACT, BEFORE SIGNING BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETELY FILLED-IN COPY WHEN YOU SIGNED IT.” Plaintiff signed below as Buyer.

Page 7 of the contract contains the Arbitration Agreement, which provides, “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.”

Plaintiff argues that Defendant, who did not sign the sales contract, cannot compel arbitration based on the contract because the FAA and federal law, particularly Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942 (Ngo), apply. (See Opposition at pp. 2-3.) Plaintiff also argues that only she or the dealership can compel arbitration, and equitable estoppel does not apply. (Id. at pp. 3-4, 7-15.)

Generally, only a party to an arbitration agreement may enforce the agreement, but the doctrine of equitable estoppel is an exception that allows a non-signatory to enforce an agreement. (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (Felisilda).) 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.)

The court in Felisilda examined an identical arbitration clause contained in a dealer’s sales contract: “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 . . . 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. . . .” (Felisilda, supra, 53 Cal.App.5th at p. 490.) The court concluded that the equitable estoppel doctrine applied: “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 FCA.” (Id. at p. 497.)

Plaintiff alleges that she received various warranties in connection with the purchase. (E.g., Complaint ¶¶ 4, 17, 32, 47, 48.) The court in Felisilda held that a similar allegation established that “the sales contract was the source of the warranties at the heart of this case.” (Felisilda, supra, 53 Cal.App.5th at p. 496.) As in Felisilda, Plaintiff’s claims against the manufacturer “directly relate[] to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Id. at p. 497.)

Plaintiff argues that Felisilda is distinguishable because the plaintiffs there brought claims against both the dealership and the manufacturer, the dealership moved to compel arbitration, and the manufacturer filed a notice of non-opposition. (Opposition at pp. 1, 14-15.) But in Felisilda, the claims against the dealership were eventually dismissed, leaving only the claims against the manufacturer before the plaintiffs’ appeal. (See Felisilda, supra, 53 Cal.App.5th at p. 489.) The Court of Appeal also expressly framed the issue as “whether a nonsignatory to the agreement has a right to compel arbitration under that agreement.” (Felisilda, supra, 53 Cal.App.5th at p. 495.)

The reasoning and holding of Felisilda lead to the conclusion that equitable estoppel doctrine permits Defendant to compel arbitration of Plaintiff’s claims against it.

Plaintiff argues that Defendant waived its right to compel arbitration by engaging in conduct inconsistent with an intent to arbitrate. (Opposition at pp. 5-6.) “‘In determining waiver, a court can 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.” ’ [Citation.]” (St. Agnes Med. Ctr. v. PacifiCare of Cal. (2003) 31 Cal.4th 1187, 1196 (St. Agnes).) Recently, the United States Supreme Court resolved a circuit split and “held that under the FAA, courts may not ‘condition a waiver of the right to arbitrate on a showing of prejudice.’” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 965 (Davis), quoting Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708, 1713 (Morgan).) Accordingly, the St. Agnes factors “‘minus the prejudice requirement’ are unaffected by Morgan and remain proper considerations in the waiver inquiry.” (Davis, supra, 84 Cal.App.5th at p. 966.)

Defendant’s conduct is somewhat consistent with an intention to arbitrate. Defendant was served with the summons and complaint on November 17, 2021. Its December 15, 2022 answer included a demand for arbitration as an affirmative defense. Defendant’s February 28, 2022 Case Management Statement also indicated that it was willing to participate in mediation, a settlement conference, or binding private arbitration. Defendant has not taken advantage of judicial discovery procedures not available in arbitration. Defendant has not propounded discovery, and the parties have not engaged in depositions or vehicle inspections. (Wilner Decl. ¶¶ 7-8.)

On the other hand, Defendant proceeded in a contradictory manner that suggests that it acquiesced to a trial instead of arbitration. Defendant’s answer demanded a jury trial in both its caption and conclusion. The Case Management Statement requested a five- to seven-day nonjury trial, and Defendant indicated the dates when it would be unavailable for trial. These parallel, inconsistent requests undermine the strength of Defendant’s commitment to arbitration. Additionally, at the March 16, 2022 Case Management Conference, with Defendant’s counsel participating, the Court scheduled a jury trial for June 19, 2023, and the Court’s order does not note any objections to setting the case for trial. Thus, aside from this motion seeking to compel arbitration and Defendant’s failure to conduct discovery, all of Defendant’s prior conduct indicating an intent to arbitrate was simultaneously accompanied by conduct indicating a willingness to go to trial. Defendant’s preference and demand for arbitration cannot be proven from those facts.

The Case Management Statement also indicated that Defendant had reserved a March 23, 2022 hearing for a motion to compel arbitration, but no such motion was filed until this motion was filed on November 2, 2022. Defendant substantially delayed nearly a year from service before requesting arbitration, despite knowing about the possibility of arbitration when it raised arbitration in its answer and Case Management Statement. This request was made only seven months before trial, noticing a hearing date only three months before the discovery deadline. At this stage, the parties should be well into preparation for trial.

After consideration of all the St. Agnes factors, the Court concludes that Defendant has waived its right to arbitration.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court