Judge Thomas D. Long, Case 22STCV35765 2023-03-21 Tentative Ruling

On November 10, 2022, Plaintiff Claudia Rodriguez 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 February 1, 2023, Defendant filed a motion to compel arbitration and stay the action pending completion of arbitration.

Plaintiff’s objection to Defendant’s Exhibit 4 is overruled. Plaintiff repeatedly refers to the language of this document and thereby acts upon it as though it is authentic. (Evid. Code, § 1414.)

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].)

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. (Maugeri 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 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 THE REVERSE SIDE, BEFORE SIGNING BELOW. YOU CONFIRM THAT YOU RECEIVED A COMPLETELY FILLED-IN COPY WHEN YOU SIGNED IT.” Plaintiff signed below as Buyer.

The second page 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 only she or the dealership can compel arbitration, and equitable estoppel does not apply. (See Opposition at pp. 3-13.)

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 ¶¶ 16, 29.) 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. 3-6.) 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. 1-3.) “‘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 consistent with an intention to arbitrate. Defendant was served with the summons and complaint on November 16, 2022. Defendant’s December 12, 2022 answer included a demand for arbitration as an affirmative defense, and the motion to compel arbitration was filed on February 1, 2023, only about seven weeks later. Defendant’s February 22, 2023 and March 15, 2023 Case Management Statements indicate that it is willing to participate in mediation, settlement conference, and binding private arbitration. Neither the answer nor the Case Management Statements requested a jury trial. Defendant has not engaged in any other motion practice or discovery, including depositions or vehicle inspections. (Maugeri Decl. ¶ 8.)

Plaintiff argues that “the parties already invoked the “litigation machinery” by undertaking the procedures of discovery” because on January 5, 2023, Plaintiff served a Notice of Deposition of Defendant’s Person Most Knowledgeable, Defendant served objections on January 12, 2023, and those objections did not include a demand for arbitration. (Opposition at p. 2) On January 19, 2023, Plaintiff requested dates for the PMK deposition, and “Defendant responded to Plaintiff’s email with no correspondence in the body of the email.” (Ibid.; Hayes Decl. ¶ 5.) Plaintiff’s service of a deposition notice does not show that Defendant took advantage of judicial discovery procedures not available in arbitration or that the parties have substantially participated in litigation. Instead, with service of only one deposition notice and Defendant’s provision of only objections, this action is in the very early stages. Additionally, Defendant’s failure to demand arbitration in its objections to the deposition notice is irrelevant, as that is not the proper method of demanding arbitration.

After consideration of all the St. Agnes factors, the Court concludes that Defendant has not waived its right to arbitration.

For an arbitration agreement to be unenforceable as unconscionable, both procedural and substantive unconscionability must be present. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.) “The relevant factors in assessing the level of procedural unconscionability are oppression and surprise.” (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 997.) “‘The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.’” (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 656.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.” (Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348, fn. omitted.) “The component of surprise arises when the challenged terms are ‘hidden in a prolix printed form drafted by the party seeking to enforce them.’” (Ibid.)

“‘Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. [Citations.] A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be “so one-sided as to ‘shock the conscience.’”’ [Citation.]’” (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85.)

Plaintiff does not identify any procedural unconscionability. (Opposition at pp. 14-15.) Both procedural and substantive unconscionability must be present for a court to invalidate an arbitration agreement due to unconscionability. (Armendariz, supra, 24 Cal.4th at p. 114.)

Additionally, Plaintiff’s argument for substantive unconscionability fails. Plaintiff contends that the Arbitration Agreement impairs her rights under the “pro-consumer” Song-Beverly Act because she will be unable to conduct discovery and the arbitrator will not have authority to enforce third-party subpoenas. (Opposition at pp. 14-15.)

The Arbitration Agreement provides that the arbitration shall be governed by the FAA “and not by any state law concerning arbitration.” Under the FAA’s provisions, an arbitrator “may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.” (9 U.S.C.A. § 7.) Even under California law, an arbitrator may issue a subpoena requiring the attendance of witnesses, and a subpoena duces tecum for the production of books, records, documents and other evidence, at an arbitration proceeding or a deposition. (Code Civ. Proc., § 1282.6, subd. (a).) “In addition, the neutral arbitrator upon their own determination may issue subpoenas for the attendance of witnesses and subpoenas duces tecum for the production of books, records, documents, and other evidence.” (Ibid.) Additionally, limited discovery is an inherent trait of arbitration, and one about which Plaintiff was warned. (See Arbitration Agreement [“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 ARBITRATION”].)

Moreover, courts regularly enforce similar arbitration agreements in Song-Beverly cases. (E.g., Felisilda, supra, 53 Cal.App.5th 486.)

Because the Court finds no unconscionability, the arbitration agreement should not be invalidated on this ground.

The motion to compel arbitration is GRANTED. The entire action is STAYED pending the completion of arbitration.

A Status Conference re: Arbitration is scheduled for October 3, 2023 at 8:30 a.m. in Department 48 at Stanley Mosk Courthouse. Five court days before, the parties are to file a joint report regarding the status of arbitration, including the name of the retained arbitrator.

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