Judge: Thomas Falls, Case: 22PSCV00716, Date: 2022-11-21 Tentative Ruling
Case Number: 22PSCV00716 Hearing Date: November 21, 2022 Dept: R
ENBOZHIA BOUDOIN
v. MERCEDES-BENZ USA, LLC (22PSCV00716)
______________________________________________________________________________
DEFENDANT MERCEDES-BENZ USA,
LLC’S MOTION TO COMPEL BINDING ARBITRATION
Responding
Party: Plaintiff Enbozhia Boudoin
Tentative Ruling
DEFENDANT MERCEDES-BENZ USA,
LLC’S MOTION TO COMPEL BINDING ARBITRATION is GRANTED.
Background
The present action arises from
alleged violations of the Song-Beverly Consumer Warranty Act (“SBCWA”). On
November 24, 2021, Enbozhia Boudoin (“Plaintiff”) purchased a 2021
Mercedes-Benz GLB 250 (“Subject Vehicle”) from an authorized dealership of
Mercedes-Benz USA, LLC (“Defendant”).
The sale of the Subject Vehicle was accompanied by certain express
warranties, whereby Defendant agreed to maintain the utility and performance of
the Subject Vehicle. The Subject
Vehicle, allegedly, was delivered to, or developed, serious defects and
nonconformities to the aforementioned express warranty, including, but not
limited to, powertrain system defects, engine defects, electrical defects, and
infotainment system defects. Plaintiff
maintains Defendant was unable to remedy the aforementioned defects, and has
failed to replace the Subject Vehicle or offer restitution in violation of the
SBCWA.
On July 14, 2022, Plaintiff
commenced this action by filing a Complaint against Defendant and Does 1
through 10. Plaintiff’s operative
Complaint alleges the following causses of action: (1) Violation of
Song-Beverly Act—Breach of Express Warranty; (2) Violation of Song-Beverly
Act—Breach of Implied Warranty; and (3) Violation of Song-Beverly Act Section
1793.2(b).
On August 12, 2022, Defendant
filed the instant Motion to Compel Binding Arbitration. Subsequently, on November 3, 2022, Plaintiff
filed an Opposition to Defendant’s Motion.
Thereafter, on November 14, 2022, Defendant filed a Reply.
Legal Standard
Under both the Title 9 section 2 of
the United States Code (known as the Federal Arbitration Act, hereinafter
“FAA”) and the Title 9 of Part III of the California Code of Civil Procedure
commencing at section 1281 (known as the California Arbitration Act,
hereinafter “CAA”), 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.)
California Code of Civil Procedure
section 1281.2 permits a party to file a motion to request that the Court order
the parties to arbitrate a controversy. (Code Civ. Proc., §
1281.2.) Under Code of Civil Procedure section 1281.2, the Court must
grant the motion “if the Court determines that an agreement to arbitrate the
controversy exists”, unless one of four limited exceptions apply. (Ibid.)
The statutory exceptions arise where: (a) the right to compel arbitration has
been waived by the petitioner; (b) grounds exist for rescission of the
agreement; (c) pending litigation with a third party creates the possibility of
conflicting rulings on common factual or legal issues; or (d) the petitioner is
a state or federally chartered depository institution that, on or after January
1, 2018, seeks to compel arbitration pursuant to a contract whose agreement was
induced by fraud or without respondent’s consent. (Ibid.)
Under Code of Civil Procedure
section 1281.2, the party moving to compel arbitration bears the burden of
demonstrating “that an agreement to arbitrate the controversy exists.”
(Code Civ. Proc., § 1281.2.) “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.” (Baker v. Italian Maple Holdings, LLC (2017) 13
Cal.App.5th 1152, 1160 [emphasis in original].) “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.” (Ibid.; see also Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55
Cal.4th 223, 236 [“The party seeking arbitration bears the burden of proving
the existence of an arbitration agreement, and the party opposing arbitration
bears the burden of proving any defense, such as unconscionability.”].)
The Court’s inquiry with respect to the moving party’s burden focuses, in part,
upon identifying the controversy in the present litigation and then deciding
whether the controversy falls within the scope of the arbitration provisions.
(Titolo v. Cano (2007) 157 Cal.App.4th 310, 316.)
“ ‘Doubts as to whether an
arbitration clause applies to a particular dispute are to be resolved in favor
of sending the parties to arbitration. The court should order them to
arbitrate unless it is clear that the arbitration clause cannot be interpreted
to cover the dispute.’ ” (California Correctional Peace Officers Ass'n v.
State¿(2006) 142 Cal.App.4th 198, 205.)
Code of Civil Procedure section
1281.4 governs the Court’s authority to stay a pending action until the
completion of arbitration. California Code of Civil Procedure section
1281.4 provides, “[i]f 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
[emphasis added].)
Discussion
Defendant moves
for an Order compelling Plaintiff to submit the present action to binding
arbitration, as well as an Order staying the present action pending the
completion of arbitration, pursuant to the Federal Arbitration Act and the
California Arbitration Act.
Defendant’s
instant Motion contends this Court is with proper authority to compel
arbitration of Plaintiff’s Complaint as Plaintiff signed an agreement at the
time of purchase of the Subject Vehicle, specifically entitled “Retail
Installment Sale Contract” (hereinafter, “Sale Contract”), wherein Plaintiff
agreed to resolve “[a]ny claim or dispute . . . which arises out of or relates
to” “[the] purchase or condition of [the Subject Vehicle]” pursuant to binding
arbitration. (Ameripour Decl., Ex. 2 at
pp. 1, 7.) Defendant’s Motion contends,
while Defendant is not a signatory of the Sale Contract—the Sale Contract is
signed by a separate entity, named “Mercedes-Benz of West Covina”—Defendant may
nonetheless enforce the Sale Contract as Defendant is a third-party beneficiary
of the Sale Contract or, alternatively, may enforce the Sale Contract pursuant
to the theory of equitable estoppel.
In Opposition,
Plaintiff argues Defendant may not enforce the arbitration provision within the
Sale Contract because Defendant is not an intended third-party beneficiary of
the Sale Contract and, further, the theory of equitable estoppel does not
permit Defendant’s enforcement of the arbitration provision.
The Court
addresses the parties’ arguments, in turn, below.
A. Whether an Agreement Non-Signatory Enforcement
In order to meet
the evidentiary burden imposed by the FAA and CAA, Defendant has produced a
copy of the Sale Contract, which includes an arbitration provision. (Code Civ. Proc., § 1281.2 [under the CAA, the party moving
to compel arbitration bears the burden of demonstrating “that an agreement to
arbitrate the controversy exists”]; Chiron Corp. v. Ortho
Diagnostic Sys. (9th Cir. 2000) 207 F.3d 1126, 1130 [“The court’s
role under the [FAA] is therefore limited to determining (1) whether a valid
agreement to arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute at issue.”].) The Sale Contract has been entered into by
Plaintiff and a separate entity, named “Mercedes-Benz of West Covina”. (Ameripour Decl., Ex. 2 at p. 1 [Sale Contract
identifies “Buyer” and “You” as Plaintiff, and “Seller-Creditor” and “We” or
“Us” as “Mercedes-Benz of West Covina”].)
The Sale Contract includes a section entitled, “Agreement to Arbitrate,”
which states “[b]y signing below, you agree that, pursuant to the Arbitration
Provision on page 7 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.” (Ibid.) This section is signed by Plaintiff. (Ibid.) On page 7 of the Sale Contract, the
arbitration provision states as follows: “Any claim or dispute, whether in
contract, tort, statute or otherwise . . . between you and us or our employees,
agents, successors or assigns, which arises out of or relates to your . . .
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.” (Id., Ex. B at p. 7.) The arbitration provision additionally
specifies that any resulting arbitration will be governed by the FAA. (Ibid.)
The Court preliminarily
notes that the issues presented within Plaintiff’s Complaint fall squarely
within the terms of the arbitration provision.
Plaintiff’s Complaint alleges three causes of action, contending the
Subject Vehicle purchased by Plaintiff pursuant to the Sale Contract was in a
defective condition and Defendant—the manufacturer of the Subject
Vehicle—failed to adhere to express and implied warranties by sufficiently
repairing or replacing the Subject Vehicle or, alternatively, provide
restitution to Plaintiff, in violation of the SBCWA. (Ameripour Decl., Ex. 1 [Complaint].) As Plaintiff’s Complaint unambiguously
concerns the “condition” of the Subject Vehicle and, further, as Plaintiff has
agreed to arbitrate “any claim or dispute . . . which arises out of or relates
to [the] . . . condition of the [Subject] vehicle”, the Court concludes the
present litigations clearly falls into the scope of the arbitration provision
within the Sale Contract.
The sole
remaining inquiry for the Court’s consideration concerns whether or not
Defendant, a non-signatory to the Sale Contract, may enforce the arbitration
provision found therein. The Court
considers Defendant’s arguments, and Plaintiff’s opposing arguments, below.
1. Non-Signatory Enforcement—Third-Party
Beneficiary Theory
Generally, only a signatory to a
contractual arbitration provision may enforce the provision. (Ronay
Family Limited Partnership v. Tweed (2013) 216 Cal.App.4th 830, 837.)
However, “[t]hird parties may enforce a contract with an arbitration provision
. . . where they are intended third party beneficiaries or are assigned rights
under the contract.” (Cohen v. TNP 2008 Participating Notes Program,
LLC (2019) 31 Cal.App.5th 840, 856.) “ ‘Whether the third party is an
intended beneficiary or merely an incidental beneficiary involves construction
of the intention of the parties, gathered from reading the contract as a whole
in light of the circumstances under which it was entered.
[Citation.]’ [Citation.]” (Cione v. Foresters Equity Services,
Inc. (1997) 58 Cal.App.4th 625, 636 [quoting Eastern Aviation Group,
Inc. v. Airborn Express, Inc. (1992) 6 Cal.App.4th 1448, 1452].)
Defendant argues it may enforce the arbitration
provision found within the Sale Contract because it is an intended third party
beneficiary to the arbitration provision. However, following a review of
the parties’ arguments, the Court is not persuaded by Defendant’s contentions.
Most dispositively, pursuant to the Court’s review of the contractual language
of the arbitration provision, it is clear that the arbitration provision was
not drafted, or entered into by the parties, with the intention of benefiting
Defendant as a manufacturer of the subject vehicle. The expressed
language of the arbitration provision inexplicably limits Plaintiff’s agreement
to arbitrate “any claim or dispute” only where such a dispute arises “between
you and us or our employees, agents, successors or assigns . . . .” (Ameripour Decl., Ex. 2 at p. 7.) “You” and “us”, as
defined by the Sale Contract, concerns disputes arising between Plaintiff and
non-party Mercedes Benz of West Covina, as opposed to Defendant. Further,
Defendant does not fall into any of the additional classes of persons
contemplated by the arbitration provision. Defendant does not maintain it
is either an employee, agent, successor, or assign of Mercedes Benz of West
Covina. Rather, Defendant is a separate
corporate entity. Defendant does not present any persuasive evidence
demonstrating to this Court that it falls into one of the classes of persons of
whom the arbitration provision was intended to benefit.
The Court finds Cione, supra,
58 Cal.App.4th 625 (“Cione”), illustrative. In Cione,
the Court of Appeal found Foresters Equity Services, Inc. (“FESCO”) to be an
intended third party beneficiary of a Uniform Application for Securities
Industry Registration (Form U-4), and thereby, determined FESCO, a
non-signatory to the Form U-4, was nonetheless permitted to enforce the
arbitration provision found therein against Plaintiff. (Cione, 58
Cal.App.4th at p. 636.) The Court of Appeal observed that Plaintiff
“signed a Form U-4 containing his agreement ‘to arbitrate any dispute, claim or
controversy that may arise between me and my firm . . .’ and Plaintiff
identified his “ ‘firm’ as FESCO.” (Ibid.) Given the
expressed language of the Form U-4, the Court of Appeal found that FESCO “was
an expressed beneficiary of [Plaintiff’s] . . . Form U-4 agreement”. (Ibid.)
In contrast with Cione, here, Defendant does not fall into one of the
categories of persons who was expressly and intentionally contemplated to
benefit from the arbitration provision. Accordingly, the Court is not
persuaded by Defendant’s contentions, and finds Defendant is not an intended
third party beneficiary to the Arbitration Provision.
Further, the Court is similarly
unpersuaded by Defendant’s remaining argument.
Defendant argues it is an intended third party beneficiary as the
arbitration provision specifically references “third parties who did not sign” the Sale Contract. (Ameripour Decl., Ex. 2
at p. 7.) However, the Court is
unpersuaded such a reference renders Defendant an intended third-party
beneficiary of the arbitration provision.
The arbitration provision does not state that “third parties who did not
sign the” Sale Contract may nonetheless enforce the arbitration provision
within the Sale Contract. As stated
above, the arbitration provision makes clear that Plaintiff’s agreement to
arbitration is limited to disputes between Plaintiff and non-party Mercedes-Benz
of West Covina, as well as their employees, agents, successors, and
assigns. (Ameripour Decl.,
Ex. 2 at p. 7.) The arbitration
provision’s reference to “third parties who did not sing the” Sale Contract is
relevant to the categories of disputes which may be submitted to arbitration by
the limited parties enumerated above.
Specifically, the relevant portion of the arbitration provision states:
Any claim or
dispute, whether in contract, tort, statute or otherwise . . . between you and
us or our employees, agents, successors or assigns, which arises out of or
relates to . . . [the] purchase or condition of this vehicle, this
contract[,] or any resulting transaction or relationship (including any such
relationship with third parties who did not sign this contract) shall, at your
or our election, be resolved by neutral, binding arbitration and not by a court
action.
(Ibid. [italics added].) As can be ascertained from the clear language
of the arbitration provision, the provision’s reference to “third parties who
did not sign this contract” is applicable to the specific categories of
disputes which may be arbitrated, as opposed to parties who may enforce and
benefit from the arbitration provision.
Based on the Court’s discussion
above, the Court concludes Defendant may not enforce the arbitration provision
within the Sale Contract pursuant to a third-party beneficiary theory.
2. Non-Signatory Enforcement—Equitable
Estoppel Theory
“The courts have made clear,
however, that an obligation to arbitrate does not attach only to those who have
actually signed the agreement to arbitrate.” (Amisil Holdings Ltd. v.
Clarium Capital Mgmt. LLC (N.D. Cal. 2007) 622 F.Supp.2d 825, 830.)
However, “in certain circumstances, a nonsignatory can compel a signatory to
arbitrate.” (Ibid.) For instance, “a signatory can be
compelled to arbitrate at the non-signatory’s insistence under ‘an alternative
estoppel theory’. . . .” (Ibid.)
“Under the doctrine of equitable estoppel, ‘as applied in “both federal
and California decisional authority, 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.” [Citations.] “By relying on contract terms in a claim
against a nonsignatory defendant, even if not exclusively, a plaintiff may be
equitably estopped from repudiating the arbitration clause contained in that
agreement.” [Citation.]’ [Citation.]” (Felisilda v. FCA US LLC (2020) 53
Cal.App.5th 486, 495 (“Felisilda”); see also Kramer v. Toyota Motor
Corp. (9th Cir. 2013) 705 F.3d 1122, 1128-1129 [“Where a nonsignatory seeks
to enforce an arbitration clause, the doctrine of equitable estoppel applies in
two circumstances: (1) when a signatory must rely on the terms of the written
agreement in asserting its claims against the nonsignatory or the claims are
‘intimately founded in and intertwined with’ the underlying contract, . . . and
(2) when the signatory alleges substantially interdependent and concerted
misconduct by the nonsignatory and another signatory and ‘the allegations of
interdependent misconduct [are] founded in or intimately connected with the
obligations of the underlying agreement.’ ”].)
“ ‘In any case applying equitable estoppel to compel arbitration
despite the lack of an agreement to arbitrate, a nonsignatory may compel
arbitration only when the claims against the nonsignatory are founded in and
inextricably bounded up with the obligations imposed by the agreement
containing the arbitration clause.’
[Citation.] In determining
whether the plaintiffs’ claim is founded on or intimately connected with the
[agreement], we examine the facts of the operative complaint.” (Id. at p. 496.)
Here, the Court concludes
Plaintiff is equitably estopped from repudiating the application of the
arbitration provision found within the Sales Contract as Plaintiff’s claims
against Defendant are sufficiently “founded on or intimately connected with”
the Sales Contract. (Felisilda, supra,
53 Cal.App.5th at p. 496.) Plaintiff’s
causes of action, as alleged within the operative Complaint, contend Defendant
violated the SBCWA by failing to repair or replace the Subject Vehicle in
compliance with certain express and implied warranties issued by
Defendant. (Def.’s RJN, Ex. 1 at ¶¶
24-26 [“Defendant was unable to conform Plaintiff’s vehicle to the applicable
express [warranty] after a reasonable number of repair attempts. Notwithstanding Plaintiff’s entitlement, Defendant
Mercedes-Benz USA, LLC has failed to either promptly replace the new motor
vehicle or to promptly make restitution in accordance with the Song-Beverly
Act.”], ¶¶ 32-36.) Plaintiff’s Complaint
clearly states that the express and implied warranties which Defendant issued,
and purportedly violated, arose out of the sale of the vehicle, which was completed
pursuant to the Sale Contract. (Id.,
Ex 1 at ¶¶ 8 [“Express warrantied accompanied the sale of the Subject Vehicle
to Plaintiff by which [Defendant] undertook to preserve or maintain the utility
or performance of Plaintiff’s vehicle or to provide compensation if there was a
failure in such utility or performance.”], 17, 32 [“The sale of the Subject
Vehicle was accompanied by implied warranties provided for under the law.”], 33,
47-48.) Accordingly, as Plaintiff’s
Complaint clearly prays for damages against Defendant as a result of
Defendant’s violation of certain express and implied warranties which were
concededly imposed by the Sale Contract, Plaintiff is now equitably
estopped from repudiating Defendant’s enforcement of the arbitration provision
found therein. (Felisilda, supra,
53 Cal.App.5th at p. 497 [“The Felisildas’ claim against FCA 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 Felisildas
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 FCA. Consequently,
the trial court properly ordered the Felisildas to arbitrate their claim
against FCA.”].)
Accordingly, the Court concludes
Defendant is entitled to enforce the arbitration provision found in the Sale
Contract according to the theory of equitable estoppel.
Conclusion
Based on the
foregoing, Defendant’s Motion to Compel Binding Arbitration is GRANTED. This action is stayed pending the completion
of arbitration.