Judge Virginia Keeny, Case 22VECV01127 2022-12-07 Tentative Ruling

Judge: Virginia Keeny, Case: 22VECV01127, Date: 2022-12-07 Tentative Ruling

Case Number: 22VECV01127 Hearing Date: December 7, 2022 Dept: W

JOSE RODRIGUEZ vs NISSAN NORTH AMERICA, INC., et al.

defendant nissan north america, inc. to compel arbitraiton and stay proceedings

Date of Hearing: December 7, 2022 Trial Date: None set.

Department: W Case No.: 22VECV01127

Moving Party: Defendant Nissan North America, Inc.

Responding Party: Plaintiff Jose Rodriguez

BACKGROUND

This is a lemon law action. Plaintiff Jose Rodriguez alleges he purchased a 2021 Nissan Sentra, which was equipped with a defective emergency braking system. Plaintiff contends Nissan was aware of the defective braking system and concealed the issue.

On August 8, 2022, Plaintiff filed a complaint against Nissan North America, Inc. and Mass Automotive Group LLC dba Nissan of Mission Hills for (1) Violation of the Song-Beverly Consumer Warranty Act – Breach of Express Warranty; (2) Fraudulent Inducement – Intentional Misrepresentation; (3) Fraudulent Inducement – Concealment; and (4) Negligent Repair.

Defendant Nissan North America, Inc. now moves to compel arbitration.

[Tentative] Ruling

Defendant Nissan North America, Inc.’s Motion to Compel Arbitration and Stay Proceedings is DENIED.

REQUEST FOR JUDICIAL NOTICE

Defendant Nissan North America, Inc. moves this court to take judicial notice of the complaint filed in this matter on August 8, 2022 (RJN, Exh. A) and the Notice of Entry of Dismissal and Proof of Service, filed in Sacramento Superior Court by Plaintiffs Dina C. Felisilda and Pastor O. Felisilda on February 11, 2016 in the matter of Dina C. Felisilda, et al, v. FCA US LLC, et al. (34-2015-00183668) (RJN, Exh. B).

The court grants Defendant’s request for judicial notice. (Evid. Code §452(d).)

DISCUSSION

Defendant Nissan North America, Inc. moves this court for an order compelling Plaintiff Jose Rodriguez to arbitrate this matter and to stay the proceedings pending the completion of arbitration. Defendant Nissan makes the motion pursuant to the arbitration provision contained in the Retail Installment Sale Contract (“Sales Contract”) agreed to and executed by Plaintiff as well as the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and the California Arbitration Act (Code Civ. Proc., §1280 et seq.).

Code of Civil Procedure section 1281.2 permits a party to file a petition to request that the court order the parties to arbitrate a controversy. The trial court first determines whether an enforceable arbitration agreement exists between the parties and then whether the plaintiff’s claims are covered by the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) “California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of Cal. (2000) 83 Cal.App.4th 677, 686.)

The party seeking to enforce the arbitration agreement bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence. (Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1284.) The party opposing the petition to compel arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. (Id.)

While the parties do not dispute the existence of the arbitration clause in the Sales Contract, the parties dispute whether Defendant Nissan can compel arbitration as a non-signatory to the Sales Contract. Plaintiff also opposes the motion on the grounds the arbitration clause is unconscionable.

Whether Nissan may move to compel arbitration as a non-signatory to the sales agreement

Defendant Nissan first argues Nissan may enforce the agreement to arbitrate under the doctrine of equitable estoppel.

I. Equitable Estoppel

Defendant Nissan argues it may compel arbitration under the doctrine of equitable estoppel as Plaintiff’s claims arise out of, and are intertwined with, the obligations of the Sales Contract.

Defendant Nissan contends under the equitable estoppel doctrine, “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 Ct. (2011) 193 Cal.App.4th 1222, 1237.) The essential requirement for applying equitable estoppel to do this is “’the claims plaintiff asserts against the nonsignatory must be dependent upon, or founded in and inextricably intertwined with, the underlying contractual obligations of the agreement containing the arbitration clause.’ (Goldman, supra, 173 Cal.App.4th at 217–18, 92 Cal.Rptr.3d 534.)” (JSM Tuscany, LLC, supra, 193 Cal.App.4th at 1237.) Defendant argues, as a result, Plaintiff is bound to arbitrate by equitable estoppel because his claims are “intimately founded in and intertwined with” the alleged obligations of his sales contract. Specifically, the complaint alleges that he “entered into a warranty contract” and the “causes of action arise out of the warranty obligations” for the sale and purchase of an automobile and premises Nissan’s liability on its alleged failure to “conform the [Sentra] to the applicable express warranty” of the contract.

To support their contention, Defendant cites to Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, a recent California Courts of Appeal decision. In Felisilda, the court enforced an arbitration clause in favor of a non-signatory car manufacturer, holding “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.]” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495.) In Felisilda, the court there held 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.)

However, the court finds unlike Felisilda, Plaintiff Rodriguez’s claims are not directly covered by the arbitration provision and moreover, like Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942, Plaintiff has not sued the dealership with whom the Sales Contract was entered with. In Ngo, the Ninth Circuit ruled that BMW NA did not have standing to enforce arbitration because it was a not a third-party beneficiary of an underlying lease agreement and the doctrine of equitable estoppel did not apply. Ngo, which contained almost identical language to the arbitration provision in Felisilda, distinguished itself from by Felisilda by focusing on how the plaintiffs in Felisilda sued both the manufacturer (nonsignatory) and the dealership (signatory). In Ngo, the plaintiff sued only the manufacturer.

Here, each arbitration provision (the instant matter, Felisilda, and Ngo) contain almost the exact same language. The arbitration provision between Plaintiff Rodriguez and Nissan of Van Nuys states:

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 (including any such relationship with third parties who do not sign this contract) shall, at your or our elects binding arbitration and not by a court action.

In Felisilda and Ngo, each refer to “condition” of the vehicle and “third parties who do not sign this contract”. However, like the plaintiffs in Ngo, Plaintiff Rodriguez did not sue the dealership in addition to the manufacturer. The Ninth Circuit in Ngo found suing the manufacturer alone made a critical difference that was not considered by the court in Felisilda.

Moreover, Plaintiff Rodriguez’s claims against Defendant Nissan do not arise out of the Sales Contract. Plaintiff Rodriguez has brought a statutory claim for violation of the Song-Beverly Act and two fraud claims for Nissan’s concealment and misrepresentation of the Emergency Brake Defect. The express and implied warranties provided by Song-Beverly arise by operation of the statute. Accordingly, these express and implied warranties are not dependent on the existence of any sales contract. The Ninth Circuit has previously made this point – “a consumer who purchased a vehicle with cash instead of credit would still state a claim for which relief could be granted, absent a Purchase Agreement.” (Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1132.) This is unlike Felisilda where the court found “the sales contract was the source of the warranties at the heart of this case” as the instant matter makes no reference to the Sales Contract.

Therefore, Defendant Nissan may not invoke the arbitration provision based on equitable estoppel.

II. Third Party Beneficiary

Defendant Nissan next argues Nissan can also enforce the arbitration provision as a third-party beneficiary. Defendant Nissan argues the intent to benefit Nissan is clear from the plain language of the Sales Contract. Plaintiff agreed to arbitrate any claim related to the Sales Contract, including “[a]ny claim or dispute … which arises out of or relates to … any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract).”

“A third party beneficiary may enforce a contract made for its benefit. (Civ. Code, § 1559.) However, ‘[a] putative third party’s rights under a contract are predicted upon the contracting parties’ intent to benefit’ it. [Citation.] Ascertaining this intent is a question of ordinary contract interpretation. [Citation.]” (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.) In other words, it is not enough that the third party would incidentally have benefited from performance.

Reading the arbitration provision as a whole, Defendant Nissan has not demonstrated that it is a third-party beneficiary of the Sales Contract. By the Sales Contract express terms, the arbitration clause governs only claims “between you [i.e., the buyer] and us [i.e., the seller] or our employees, agents, successors, or assigns.” Defendant Nissan does not fall within any of these categories nor is it alleged anywhere that Defendant is the successor or assignee of Nissan of Van Nuys. Moreover, the court disagrees with Defendant Nissan’s interpretation of the express language “which arises out of or relates to your … purchase or condition of the [Subject] Vehicle … or any resulting transaction or relationship, including any such relationship with third parties who do not sign this contract ….” Here, the arbitration clause does bind Plaintiff, the buyer, to arbitration claims against Nissan of Van Nuys, the seller, that arise out of any resulting “relationships”. This could include third parties who did not sign the contract. However, the arbitration provision expressly specifies that this will be at Plaintiff’s or Nissan of Van Nuys’ election. (See Ngo, supra, 23 F.4th at p. 946.) Nothing in the Sales Contract demonstrates an intention that the arbitration clause must apply to Defendant Nissan.

Therefore, Defendant Nissan has failed to show that it is a third-party beneficiary of the Sales Contract.

Whether the arbitration provision is unconscionable

In opposition, Plaintiff Rodriguez argues the arbitration provision was procedurally unconscionable due to the unnegotiable nature of the purchase agreements. Plaintiff Rodriguez also argues the arbitration provision was substantively unconscionable as the agreement was unduly harsh, oppressive, and one-sided.

Courts analyze unconscionability in terms of procedural and substantive elements. (McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 87.) “The procedural element of unconscionability focuses on whether the contract is one of adhesion…,” and “whether there is ‘oppression’ arising from an inequality of bargaining power or ‘surprise’ arising from buried terms in a complex printed form. [Citation.] The substantive element addresses the existence of overly harsh or one-sided terms.” (Ibid.) “An agreement to arbitrate is unenforceable only if both the procedural and substantive elements are satisfied … ‘[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.’ [Citation.]” (Ibid.)

The court finds Plaintiff’s argument without merit. For example, Plaintiff argues that the alleged provision seeks to deprive Plaintiff of their fundamental and constitutional right to a jury trial. Such an argument would make all arbitration agreements substantively unconscionable. Moreover, Plaintiff’s argument that the alleged arbitration clause allows for a choice of arbitrator but only so long as the selling dealer or creditor approves the choice is similarly meritless. Plaintiff is afforded the right to select an arbitrator per the usual procedure of the American Arbitration Association. Plaintiff has not provided any evidence that the provision was procedurally unconscionable. An arbitration agreement will only not be enforced if it is both procedurally and substantively unconscionable. (OTO, L.L.C v. Kho (2019) 8 Cal.5th 111, 114.) The party resisting a motion to compel arbitration on the grounds that it is unconscionable bears the burden of proving unconscionability by substantial evidence. (Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 679, 692.)

Accordingly, Plaintiff Rodriguez has failed to demonstrate the arbitration provision of the Sales Contract is both substantively and procedurally unconscionable.