Judge: Timothy Patrick Dillon, Case: 22STCV03726, Date: 2023-01-05 Tentative Ruling
Case Number: 22STCV03726 Hearing Date: January 5, 2023 Dept: 73
YOUNGHYEON LEE v.
NISSAN NORTH AMERICA, INC.
Counsel for Defendant (Movant): Robert A. Shields, Parada
K. Ornelas
(Wilson Turner Kosmo LLP)
Counsel for Plaintiff (Opposition): Tionna Dolin, Daniel
Law (Strategic Legal Practices, APC)
Defendant’s Motion to
Compel Arbitration and Stay of Proceedings
(filed 8/3/22)
TENTATIVE RULING
The court grants the motion. The
court compels Plaintiff and Defendant to arbitrate Plaintiff’s
claims. The case is ordered stayed pending binding arbitration as to
the entire action.
A. BACKGROUND¿
¿
On May 7, 2021, Younghyeon Lee
(“Plaintiff”) purchased a new 2020 Nissan Pathfinder (the “vehicle”).¿ The
parties to the sales contract are Plaintiff, as Buyer, and Nissan of Tustin, as
Seller-Creditor.¿ The sales contracts provides “we” or “us” sometimes refer to
the Seller-Creditor.¿ The sales contract contains an arbitration
provision.¿
¿
On January 31, 2022, Plaintiff filed a
complaint against Defendant Nissan of North America, LLC (“Nissan”) alleging
violations of the Song-Beverly Warranty Act.¿ Nissan is the manufacturer of
Plaintiff’s vehicle.¿ On August 3, 2022, although not a signatory to the sales
contract, Nissan filed a motion to compel arbitration.¿¿ Plaintiff filed an
opposition on December 21, and Nissan filed a reply on December 28.
¿
B.
DISCUSSION¿¿
1. Judicial
Notice
Nissan requests the court take judicial
notice of Plaintiff’s complaint.
Plaintiff requests the court take
judicial notice of the following federal court decisions:
·
Ngo v. BMW of N. Am., LLC (9th Cir. Jan.
12, 2022) 23 F.4th 942;
·
Morgan v. Sundance, Inc. (U.S. Supreme
Court, May, 2022) 142 S. Ct. 1708;
·
Davis v. Shiekh Shoes, LLC (Oct. 31,
2022) 84 Cal.App.5th 956.
The unopposed requests are granted. (Evid. Code §§ 452 and 453.)
In its reply, Nissan makes a supplemental
request for judicial notice of the following documents:
·
August 3, 2022 Stipulation and Protective Order
– Confidential Designation Only
·
Felisilda Sales Contract, attached to the
Motion to Compel Arbitration in Felisilda v. FCA US LLC, Superior Court
of California, Sacramento County, Case No. 34-2015-001883668 (filed October 8,
2015).
The first supplemental request is
granted. (Evid. Code § 452.) The second supplemental request is the sales
contract at issue in Felisilda. Although
contracts may be judicially noticed, judicial notice of the Felisilda
contract is improper when the sales contract here is not referenced in the
complaint. The court may take judicial
notice of agreements where the pleading references the agreements and there are
no objections. (See Salvaty v. Falcon
Cable TV (1985) 165 Cal.App.3d 798, 800; see also San Francisco Unified
School Dis. Ex rel. Contreras v. Laidlaw Transit, Inc. (2010) 182
Cal.App.4th 438, 444 fn.5 (citing Performance Plastering v. Richmond
American Homes of California, Inc. (2007) 153 Cal.App.4th 659, 666
fn.2).) Here, the pleading does not
reference the Felisilda contract.
Therefore, the second supplemental request is DENIED.
2. Existence
of Arbitration Agreement
Nissan has adequately shown the existence
of the contract containing the arbitration provision. (Condee v. Longwood
Management Corp. (2001) 88 Cal.App.4th 215, 218.)¿ Plaintiff argues that
Nissan cannot compel arbitration because (1) Nissan has waived its right to
arbitrate; (2) no arbitration agreement exists between Plaintiff and Nissan;
(3) Plaintiff’s claims are not arbitrable under federal decisional law; (4)
because this case is distinguishable from Felisilda, the doctrine of
equitable estoppel does not apply; and (5) Nissan is not a third-party
beneficiary of the sales contract. In
reply, Nissan contends (1) it has not waived the right to arbitrate; (2) the Felisilda
decision is binding on this court, and (3) Nissan has standing to enforce
the Arbitration provision as a third-party beneficiary.
3. Arbitrability
“In general, it is left to an arbitrator to construe the
meaning and extent of the arbitration agreement between the
parties. However, it is for the courts
to decide questions of arbitrability, which include whether the parties are
bound by a given arbitration clause, or whether it is unenforceable as
unconscionable. (Indep. Ass’n of
Mailbox Ctr. Owners, Inc. v. Super. Ct. (2005)
133 Cal.App.4th 396, 406, citations omitted.)
“Although threshold questions of arbitrability are
ordinarily for courts to decide in the first instance under the [Federal
Arbitration Act (FAA)], the ‘[p]arties to an arbitration
agreement may agree to delegate to the arbitrator, instead of a
court, questions regarding the enforceability of the agreement.’” (Pinela v. Neiman Marcus Group, Inc.
(2015) 238 Cal.App.4th 227, 239 (Pinela) quoting Tiri v. Lucky
Chances, Inc. (2014) 226 Cal.App.4th 231, 241.)
“For a delegation clause to be effective, two
prerequisites must be satisfied. First, the language of the clause must
be clear and unmistakable. (Rent-A-Center,
West, Inc. v. Jackson (2010) 561 U.S. 63, 69, fn. 1 (Rent-A-Center).)
The required clear and unmistakable expression is a ‘heightened standard’ ….
Thus, ‘[u]nless the parties clearly and unmistakably provide otherwise, the
question of whether the parties agreed to arbitrate is to be decided by the
court, not the arbitrator.’” (Pinela,
supra, at 239-40, quoting Rent-A-Center, supra, at 69, fn.
1, and quoting AT&T Techs. v. Commc’ns Workers (1986) 475 U.S. 643,
649, other citations omitted.)
“Second, the delegation must not be revocable
under state contract defenses to enforcement. Among these defenses is
unconscionability.” (Pinela, supra,
at 240, citation omitted.) “When deciding
whether the parties agreed to arbitrate a certain matter
(including arbitrability), courts generally …should apply ordinary
state-law principles that govern the formation of contracts.” (Aanderud v.
Super. Ct. (2017) 13 Cal.App.5th 880, 890, quoting First
Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944, internal
quotation marks omitted.)
Nissan argues that the question
of arbitrability (i.e., whether the arbitration
agreement is enforceable) should be delegated to the arbitrator
instead of the Court. (Mot., pp. 17-18.)
Nissan points the court to the alleged arbitration agreement, which, among
other things, states: “Any claim or
dispute … (including the interpretation and scope of this Arbitration
Provision, and the arbitrability of the claim or dispute) … shall, at
your or our election, be resolved by neutral, binding arbitration and not by a
court action.” (Ornelas Decl., Ex. A, p.
7.)
Plaintiff argues: (1) that the issue
of arbitrability is left to the court unless the parties clearly and
unmistakably provide otherwise; (2) that Nissan is not a party to the sales
contract and thus Nissan does not have the clear and
unmistakable right to enforce the agreement; and (3) that the issue
of arbitrability is properly before this court. (Opp., p. 16.) Nissan does not make any additional arguments
regarding arbitrability in its reply.
On the issue of arbitrability, the court concludes
that the court must decide arbitrability, although not for the reasons
Plaintiff argues. The court finds that the
language in the alleged contract is in fact clear and unmistakable: “Any claim
or dispute … (including the interpretation and scope of this Arbitration
Provision, and the arbitrability of the claim or dispute) … shall, at
your or our election, be resolved by neutral, binding arbitration and not by a
court action.” (Ornelas Decl., Ex. A, p.
7.) The phrase “your or our election”
only refers to two parties: Plaintiff Younghyeon Lee and non-party
Nissan of Tustin.
Defendant Nissan is not a signatory to the alleged arbitration
agreement. Thus, as to the narrow issue
of arbitrability, the alleged contract clearly and unmistakably does not
bind the parties to arbitration in this situation. The court concludes as a matter of law that
this contract language does not meet the heightened pleading standard for
arbitrability by an arbitrator, and thus the court continues to assess
the arbitrability of this matter.
4. Waiver¿
Plaintiff argues that Nissan waived its
right to arbitrate by failing to indicate an intention to compel arbitration
and by utilizing the acts of litigation.¿ Furthermore, under the recent
decision in Morgan v. Sundance (2022) 142 S.Ct. 1708 (Morgan),
prejudice is no longer a factor in determining whether a party waived the right
to arbitrate.
Nissan contends Morgan is
not controlling. Further, Nissan has not
participated in the litigation process in a manner giving rise to waiver, nor
is there evidence Nissan has unreasonably delayed.¿
Contrary to Nissan’s assertion, Morgan
is controlling. (See Davis v.
Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 967 (Shiekh Shoes)
[recognizing that a finding of waiver on a showing of prejudice is unauthorized
under the FAA, as articulated in Morgan].)
Notwithstanding Nissan’s incorrect
contention, the court finds that Nissan has not waived its right to
arbitrate. “To decide whether a waiver
has occurred, the court focuses on the actions of the person who held the
right; the court seldom considers the effects of those actions on the opposing
party.” (Morgan, supra,
at p. 1713.) “Courts have recognized
that where the FAA applies, whether a party has waived a right to arbitrate is
a matter of federal, not state, law. [Citation.]” (Shiekh Shoes, supra, 84
Cal.App.5th at p. 963.) In St. Agnes
v. PacifiCare of California (2003) 31 Cal.4th 1187, 1196 (St. Agnes),
the California Supreme Court adopted a multi-factor test from the Tenth Circuit
opinion in Peterson v. Shearson/American Express, Inc. (10th Cir. 1988)
849 F.2d 464 (Peterson) wherein a court may 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.¿ (Peterson, supra, 849
F.2d at pp. 467-68; St. Agnes, at p. 1196.)¿ However, following the
U.S. Supreme Court’s decision in Morgan, courts may no longer condition
a determination of waiver on prejudice.
(See Morgan, supra, at p. 1713.) The remaining Peterson factors are
proper considerations in the waiver inquiry.
(Shiekh Shoes, supra, at p. 963.)
Here, the arbitration agreement states:
“Any arbitration under this Arbitration Provision shall be governed by the
Federal Arbitration Act (9 U.S.C. § 1 et. Seq.) and not by any state law
concerning arbitration.” (Ornelas Decl.,
Ex. A, at p. 7.) Accordingly, federal
law supplies the law on waiver in this case.
(See Shiekh Shoes, supra, at p. 963.)
Curiously, Plaintiff does not cite any
federal cases discussing waiver of the right to arbitration. Instead, Plaintiff cites five state law
cases. (See Opp., p. 5:5-10.) Each are inapplicable. In Guess?, Inc. v. Superior Court
(2000) 79 Cal.App.4th 553, Lewis v. Fletcher Jones Motor Cars, Inc. (2018)
205 Cal.App.4th 436, Adolph v. Coastal Auto Sales, Inc. (2010) 184
Cal.App.4th 1443, Zamora v. Lehman (2010) 186 Cal.App.4th 1, and Robert
v. El Cajon Motors, Inc. (2011) 200 Cal.App.4th 832, the respective courts
considered prejudice as a factor which, following Morgan, is improper
since no single Peterson factor is dispositive and the totality of the
circumstances must be considered in each case.
Each case is also distinguishable. In Guess? Inc., the court found waiver
where the defendant substantially participated in the litigation process by
serving document demands and interrogatories, responding to discovery,
scheduling more than ten third-party depositions, and taking at least four
third-party depositions. (Guess? Inc.,
supra, at p. 556.) In Lewis,
the court found waiver where the defendant filed multiple demurrers and motions
to strike and participated in discovery.
(Lewis, supra, at p. 446.)
In Adolph, the court found waiver where defendant filed two
demurrers, accepted discovery requests, and engaged in efforts to schedule
discovery. (Adolph, supra,
at p. 1451.) In Roberts, the
court found waiver where defendant conducted substantial written discovery
regarding plaintiff’s class action allegations that would have been useless if
arbitration was ordered. (Roberts,
supra, at p. 845.) Last, in Shiekh
Shoes, the court found waiver where defendant waited 17-months before
moving to compel arbitration, undertook numerous responses to the lawsuit in
that time, and provided no reasonable explanation for its delay. (Shiekh Shoes, supra, at p. 967-68.)
Here, Nissan has not participated in the
litigation process to the extent of each defendant in the cases cited by
Plaintiff. Nissan has filed only an
answer, which sets forth an affirmative defense for arbitration. (Answer, p. 9.) Nissan has not filed any demurrers, motions
to strike, or otherwise engaged in the merits of Plaintiff’s claims. With regards to discovery, Nissan has
provided responses and supplemental responses to one set of interrogatories. Nissan, however, has not propounded any
discovery of its own. Moreover, Nissan
moved to compel arbitration less than five months after filing its answer.
Based upon the above, unquestionably
Nissan has participated in the litigation.
However, mere participation in the litigation is insufficient, standing
alone, to establish waiver. (St.
Agnes, supra, 31 Cal.4th at p. 1203.) There must also be some
judicial litigation of the merits of arbitrable issues. (Ibid.) Here, Plaintiff makes no showing that there
has been judicial litigation of the merits of arbitrable issues. The waiver argument is not well taken.
In sum, given the relatively short period
of time between filing an answer and moving to compel arbitration, as well as
Nissan’s relatively scant participation in the litigation process, the court finds
that Nissan has not waived with its right to compel arbitration.
¿
5. Equitable
Estoppel¿
¿
The Third Appellate District’s decision
in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486 (Felisilda)
is dispositive to this case. In Felisilda, under an equitable
estoppel theory, the court enforced an arbitration clause in favor of a
non-signatory car manufacturer.¿ The arbitration clause provided:¿
¿
“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 p. 490.)¿¿¿
¿
In compelling arbitration, the court in Felisilda
relied on the language in the arbitration clause:¿ “which arises out of or
relates to . . . condition of this vehicle” and “(including any such
relationship with third parties who do not sign this contract).”¿ Here, the
arbitration clause contains the critical language relied on by the court in Felisilda.¿
The clause contains the language “arises out of or relates to . . . condition
of this vehicle” and “(including any such relationship with third parties who
do not sign this contract).”¿ The arbitration provision in this action
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 sight this contract) shall,
at your or our election, be resolved by neutral, binding arbitration and
not by a court action.”¿
... [¶] Any arbitration under this
Arbitration Provision shall be governed by the Federal Arbitration Act, 9
U.S.C. § 1 et seq. (“FAA”) and not by any state law concerning
arbitration.”¿¿¿
¿
(Ornelas Decl., Ex. A, p. 7.)
Emphasizing the importance of the precise
arbitration language at issue, in Felisilda, the court pointed out:¿ “In
signing the sales contract, the Felisildas agreed that ‘[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
. . . shall . . . be resolved by neutral, binding arbitration and not by a
court action.’¿ (Italics added.) Here, the Felisildas’ claim against FCA
relates directly to the condition of the vehicle.”¿ (Id. at p. 496.)¿
The court held:¿ “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.”¿ (Id. at p. 497.)¿ Likewise, Nissan is entitled to arbitration in
this case.
¿
Plaintiff asserts that the Court should follow recent
federal authority in Ngo v. BMW of North America, LLC (9th Cir.
2022) 23 F.4th 942 (Ngo), and prior authority in Kramer v.
Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122 (Kramer) to
find that Defendant is not entitled to enforce the arbitration provision.
However, as noted by the Ninth Circuit in Ngo, “[s]tate law
determines whether a non-signatory to an agreement containing an arbitration
clause may compel arbitration” and the Court thus applied state law to resolve
the issue before the court. (See Ngo, supra, at
946.) The FAA does not “alter background principles of state contract law
regarding the scope of agreements (including the question of who is bound by
them).” (Arthur Andersen LLP v.
Carlisle (2009) 556 U.S. 624, 630.) As opposed to the California
Court of Appeal ruling in Felisilda, Ngo is not binding on this
court and provides persuasive authority only. (See Felisilda, supra,
at 497.) The Court does not find Ngo more persuasive than binding
authority in Felisilda. Because
state law determines whether a nonsignatory party may compel arbitration, the
court rejects Plaintiff’s argument that the choice-of-law provision in the
arbitration agreement here precludes the applicability of Felisilda.
Insofar as Plaintiff relies on Kramer,
the court disagrees. The court in Felisilda
distinguished Kramer because the language of the arbitration clause in Kramer
did not contain a reference to “third parties.”¿ The Felisilda court
reasoned:¿ “In Kramer, purchasers of Toyota vehicles agreed to arbitrate
between themselves and dealerships.¿ [Citation.]¿ The retail sales contracts in
Kramer did not contain any language that could be construed as extending
the scope of arbitration to third parties.¿ [Citation.]¿ By contrast, 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.¿ As the operative complaint makes clear, the Felisildas’ claim arises
out of the condition of the vehicle.”¿ (Felisilda, supra, 53 Cal.App.5th
at p. 497.)¿¿ The arbitration provision here at issue includes the same
provision as in Felisilda contemplating relationships with nonsignatory
parties, and this distinction in Felisilda thus applies. (Ornelas Decl., Ex. 2.)
The court in Felisilda further
criticized another federal decision which Plaintiff cites that involved the
same language as in this case: “condition of this vehicle” and “third
parties.”¿ The court held:¿ “We decline to follow the Jurosky court’s
glossing over language in an arbitration clause that expressly includes third
party nonsignatories.”¿ (Id. at p. 498.)¿ Finally, the court in Felisilda
again emphasized the importance of the contractual language:¿ “We also
reject the Felisildas’ contention that the rule requiring mutual consent to arbitrate
is violated for lack of the Felisildas’ consent to arbitrate their claim
against FCA.¿ As explained above, the Felisildas’ agreement to the sales
contract constituted express consent to arbitrate their claims regarding
vehicle condition even against third parties.¿ Their consent preceded the
motion to compel filed in this case.”¿ (Ibid.)¿
¿
Like in Felisilda, the arbitration
provision in this case also contains language pertaining to third parties and
the condition of the vehicle. (Ornelas
Decl., Ex. A, p. 7 [“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 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
sight this contract) shall, at your or our election, be resolved by
neutral, binding arbitration and not by a court action.”]. The arbitration provision in Felisilda
contains language identical to the arbitration provision in this case.¿ The
arbitration provision features the language repeatedly relied on by the court
in Felisilda.¿ Here, there is the language: “which arises out of or relates
to . . . [the] condition of this vehicle” and “(including any such relationship
with third parties who do not sign this contract).”
Plaintiff asserts that Plaintiff's claims are not intimately
founded in the sales contract, which has mainly to do with the financing
Plaintiff obtained to purchase his vehicle.
However, the sales contract goes far beyond simply arranging financing
for the vehicle, integrating numerous provisions related to Plaintiff’s rights
regarding the purchase of the vehicle.
There is no evidence that a sales contract, if Plaintiff had paid by
cash, would not likewise include an arbitration provision. Under Felisilda, Plaintiff’s claims
are intimately connected with the sales contract. The sales contract is “the source of the warranties
at the heart of this case” because the Plaintiff expressly agreed to arbitrate
claims arising out of the condition of the vehicle—even against third party
nonsignatories to the contract. (Felisilda,
supra, 53 Cal.App.5th at pp. 496, 497, 499. Thus, Nissan more than merely references an
agreement containing an arbitration provision.
(See Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209,
218.) Given the material similarities in language, the equitable estoppel
doctrine applies. ¿
Plaintiff further argues that Felisilda
is distinguishable from this case because the Felisildas brought an action
against FCA US LLC, the nonsignatory, and the signatory dealership whereas
Plaintiff, here, has brought an action against a nonsignatory party in Nissan
only.
The court is not persuaded. First,
Plaintiff overlooks that even after the Felisildas dismissed the signatory
dealership, the court of appeal held that it was still proper for the plaintiff
and FCA to arbitrate plaintiff’s claims. Second, in signing the contract
containing the arbitration provision, Plaintiff has agreed to arbitrate such
claims even against third party nonsignatories. Plaintiff cites
several federal district court cases concluding otherwise. (Opp., p. 11, fn. 5.) However, those cases are not
controlling. As stated above, Felisilda
is binding upon this court.
In sum, the court finds that the equitable estoppel
doctrine applies. Finding Nissan entitled to arbitration, the court
does not address Nissan’s alternative argument that Nissan is entitled as well
to enforce the arbitration provision as a third-party beneficiary.
C. DISPOSITION¿
¿
The motion to compel arbitration is
granted.¿ All proceedings in this action are stayed pending completion of the
arbitration.