Judge Thomas Falls, Case 22PSCV00750 2023-03-13 Tentative Ruling

RE: NOEMI VEJAR GARCIA, et al. vs DOWNEY IMPORT CARS, INC., A CALIFORNIA CORPORATION, et al. (22PSCV00750)

On July 21, 2022, Plaintiffs NOEMI VEJAR GARCIA aka NOEMI VEJAR and RICARDO GARCIA filed suit against DOWNEY IMPORT CARS, INC., a California Corporation dba DOWNEY NISSAN; NISSAN NORTH AMERICA, INC., a Delaware Corporation, and DOES 1 through 10, inclusive.

On January 24, 2023, Defendants Nissan North America, Inc., and Downey Import Cars, Inc. dba Downey Nissan (collectively, “Defendants”) filed the instant MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS.

The Court’s starting point is whether a valid agreement to arbitrate exists. (Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396.) A petition to compel arbitration must allege both (1) a “written agreement to arbitrate” the controversy, and (2) that a party to that agreement “refuses to arbitrate” the controversy. (Code Civ. Proc., § 1281.2.) Once this is done, the burden shifts to the opposing party to demonstrate the falsity of the purported agreement. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218–219.) In ruling on a motion to compel arbitration, the court must first determine whether the parties actually agreed to arbitrate the dispute, and general principles of California contract law help guide the court in making this determination. (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 541.) A petition to compel arbitration is a suit in equity to compel specific performance of a contract. (Frog Creek Partners, LLC. v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 532.)

Defendant moves for arbitration because the sales contract Plaintiff signed contained a arbitration provision.

Whether The Sales Contract Contains a Valid, Written Arbitration Provision to Which Plaintiffs Assented

“EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.”

Therefore—considering that there is a written agreement with a clear arbitration provision that Plaintiff Noemi Vejar signed—there is a valid agreement to arbitrate.

Whether Defendant, as a Nonsignatory, May Enforce the Arbitration Provision of the Sales Contract?

Defendant advances two theories on which it—as a nonsignatory—can enforce the arbitration provision: (i) equitable estoppel and (ii) third-party beneficiary status. The court need only address equitable estoppel as it finds Defendant has met the requirements.

Generally, only a party to an arbitration agreement may enforce the agreement.¿ (Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613.)¿ However, “[u]nder 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 omitted.]¿ “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.”¿ [Citations omitted.]’”¿ (Felisilda v. FCA US LLC (2020) 53 Cal.App.4th 486, 495-96 [citing JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237].)

As a prefatory matter, the court must determine whether Felisilda—a leading state case describing equitable estoppel in such a context—is applicable. Plaintiff argues it is not.

In Felisilda, the plaintiff filed suit against the manufacturer (FCA) and the dealer/FCA repair facility (Elk Grove Dodge) for violation of the SBA. Elk Grove Dodge moved to compel arbitration.[1] In so moving, the dealer argued that the “entire matter should be ordered to arbitration—including FCA, even though FCA was not a signatory to the sales contract. FCA filed a ‘notice of non-opposition’ to Elk Grove Dodge.” (Felisilda, supra, 53 Cal.App.4th at 491.) Elk Grove Dodge argued that California law allows a court to order a non-signatory to a sales contract to arbitration along with the signatories to the contract.” (Id. at 492.) Consequently, one of the issues presented before the appellate court was whether “the trial court erred in order [plaintiffs] to arbitrate their claim against FCA because FCA was a nonsignatory to the sales contract that contained the arbitration provision.” (Id. at 493.) The appellate court disagreed reasoning that “based on the language in the sales contract and the nature of the [plaintiffs’] claim against FCA.” (Id. at 496.) More specifically, the court explained that “the arbitration provision in this case provides for arbitration of disputes that include third parties so long as the dispute pertains to the condition of the vehicle.” (Id. at 497.)

Similarly, here, the court finds an express extension of arbitration to claims involving nonsignatories that relate to the Vehicle. Here, the Arbitration provision here states that:

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.

Accordingly, as the arbitration provision references a third party’s rights regarding arbitration, the court finds Felisildas wholly instructive and applicable to this instant case.[2]

Moreover, as the crux of the Complaint pertains to “Defects and nonconformities to warranty manifested themselves within the applicable express warranty period, including but not limited to suspension, engine, and electrical,” and Defendants failed to conform the vehicle to the express and implied warranties, Plaintiffs’ claims thus pertain to the purchase of the 2021 Nissan Sentra and the vehicle’s warranties

As such, considering that express and implied warranties are generally the nucleus of contractual transactions involving the purchase of vehicles (used or new), the court finds the causes of action in the complaint are “intimately founded in and intertwined with the underlying contract obligations.”

Therefore, having examined the facts of the complaint wherein Plaintiff’s claims against Defendant directly relate to the condition of the vehicle, the court determines that Plaintiff’s claims is founded on and intimately connected with the sales contract. To hold otherwise, would undermine the maxim of jurisprudence that “[h]e who takes the benefit must bear the burden.” (NORCAL Mutual Ins. Co., supra, 84 Cal.App.4th 64, 84, quoting Civ.Code, § 3521.)

Having determined that equitable estoppel applies, the court need not engage in an analysis of whether Defendant is a third-party beneficiary.

“‘The fundamental point is that a party is ‘not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute ... should be resolved.’” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306, quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84.) This fundamental point is what Plaintiff is attempting to undermine: to deny the applicability of a material term of the very agreement it sues on.

Based on the foregoing, the court compels arbitration and stays all proceedings.

[1] There, as provided in the opinion, the arbitration provision was as follows: “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. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action.” (Id. at 490) (italics and emphasis added).

[2] Finding that Felisilda applies, the court need not address Plaintiff’s non-binding authority, notably Plaintiff’s opposition’s focus on federal opinions, predominantly Ngo v. BMW of North America LLC. Though the arbitration provision (Section 52) provides for the Federal Arbitration Act (“FAA”) to govern, “[s]tate law determines whether a non-signatory to an agreement containing an arbitration clause may compel arbitration.” (Ngo v. BMW of North America, LLC (2022) 23 F.4th 942, 946, citing Arthur Anderson LLP v. Carlisle (2009) 556 U.S. 624, 631-32) (emphasis added). Therefore, as state law governs, “federal case law is not binding on this court.” (Alameida v. State Personnel Bd. (2004) 120 Cal.App.4th 46, 61; see also Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229 [“the decisions of federal district and circuit courts, although entitled to great weight, are not binding on state courts even as to issues of federal law.”].)