Judge: Walter P. Schwarm, Case: 30-2022-01248439, Date: 2022-09-13 Tentative Ruling
Defendant’s (Hyundai Motor America) Motion to Compel Binding Arbitration (Motion), filed on 4-15-22 under ROA No. 23, is DENIED.
The court GRANTS Defendant’s Request for Judicial Notice, filed on 4-15-22 under ROA No. 12, pursuant to Evidence Code section 452, subdivision (d).
Code of Civil Procedure section 1281.2 states in part, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for rescission of the agreement. [¶] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295. . . . [¶] If the court determines that a party to the arbitration is also a party to litigation in a pending court action or special proceeding with a third party as set forth under subdivision (c), the court (1) may refuse to enforce the arbitration agreement and may order intervention or joinder of all parties in a single action or special proceeding; (2) may order intervention or joinder as to all or only certain issues; (3) may order arbitration among the parties who have agreed to arbitration and stay the pending court action or special proceeding pending the outcome of the arbitration proceeding; or (4) may stay arbitration pending the outcome of the court action or special proceeding.”
Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219, provides, “In Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (Rosenthal), our Supreme Court set forth the procedure to be followed when a petitioner seeks to compel arbitration: ‘[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable. Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence. If the party opposing the petition raises a defense to enforcement—either fraud in the execution voiding the agreement, or a statutory defense of waiver or revocation [citation]—that party bears the burden of producing evidence of, and proving by a preponderance of the evidence, any fact necessary to the defense.’ [Citation.]” (Footnote 8 omitted.) Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1060 (Espejo), provides, “In context, the brief discussion of Condee by the court in Toal regarding a petitioner's ultimate burden has no bearing on the question before us—whether defendants may meet their initial burden to show an agreement to arbitrate by attaching a copy of the arbitration agreement purportedly bearing the opposing party's signature. We conclude they may, in compliance with the requirements of section 1281.2 and California Rules of Court, rule 3.1330.” (Italics in Espejo.)
Equitable Estoppel:
The Motion states, “. . . HMA may enforce Plaintiffs’ agreement to arbitrate as a third-party beneficiary, as wells as through equitable estoppel.” (Motion; 5:20-22.)
Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 495 (Felisilda), states, “As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.]” Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763 (Westra), provides, “ ‘ “The strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement, and a party cannot be compelled to arbitrate a dispute that he has not agreed to resolve by arbitration. [Citation.]” ’ [Citations.]” Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 622 (Correia), explains, “Under state and federal law, an arbitration agreement applies only to the parties who agreed to its terms and a party cannot be compelled to arbitrate a dispute that it has not elected to submit to arbitration. [Citation.]” Jones v. Jacobson (2011) 195 Cal.App.4th 1, 15 (Jones), states, “We conclude that in such instances, the nonsignatory bears the burden to establish he or she is a party to the arbitration agreement/provision covering the dispute.” (Italics in Jones.) “As is now obvious, with limited exceptions only parties to an arbitration agreement can enforce it or be required to arbitrate. [Citation] [¶] ‘. . . Even the strong public policy in favor or arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such agreement.’ . . . [¶] ‘Exceptions in which an arbitration agreement may be enforced by or against nonsignatories include where a nonsignatory is a third party beneficiary of the agreement [citation] and when a nonsignatory and one of the parties to the agreement have a preexisting agency relationship that makes it equitable to impose the duty to arbitrate on either of them. [Citations.]’ [Citation.] (Id., at pp. 17-18.)
The parties do not dispute that Plaintiffs (Diana Tapia Suazo and Ulises Suazo) and Harding Hyundai entered into a Retail Installment Sale Contract (RISC) regarding the subject vehicle. (Tahsildoost Decl., ¶ 4 and Exhibit 2.) The RISC provides the following terms regarding arbitration: “1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL. [¶] 2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS. [¶] 3. 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.” (Tahsildoost Decl., ¶ 4 and Exhibit 2.) The RISC further 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 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. . . .” (Tahsildoost Decl., ¶ 4 and Exhibit 2.) The RISC specifically defines “You” as the “Buyer” or “Co-Buyer” (Plaintiffs) and “we” or “us” as the “Seller” (Harding Hyundai). (Tahsildoost Decl., ¶ 4 and Exhibit 2.) Defendant is not a signatory to the RISC. Hardin Hyundai has never been a party to this action. (See, Complaint filed on 1-15-21 under ROA No. 2.)
In Felisilda, “. . . the Felisildas brought an action against Elk Grove Dodge and the manufacturer, FCA US LLC (FCA) for violation of the Song-Beverly Consumer Warranty Act (Song-Beverly Act) (Civ. Code, § 1790 et seq.). Relying on the retail installment sales contract (sales contract) signed by the Felisildas, Elk Grove Dodge moved to compel arbitration. FCA filed a notice of nonopposition to the motion to compel. The trial court ordered the Felisildas to arbitrate their claim against both Elk Grove Dodge and FCA. In response, the Felisildas dismissed Elk Grove Dodge. The matter was submitted to arbitration, and the arbitrator found in favor of FCA. The trial court confirmed the arbitrator's decision. From the resulting judgment, the Felisildas appeal.” (Id, at p. 489; Footnote 1 omitted.) “In October 2015, Elk Grove Dodge moved to compel arbitration of the Felisildas’ claim. In so moving, Elk Grove Dodge argued 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. FCA did not advance any argument in support of arbitration.” (Felisilda, supra, 53 Cal.App.5th at p. 491.)
“As a general rule, only a party to an arbitration agreement may enforce the agreement. [Citation.] However, there are several exceptions that allow a nonsignatory to invoke an agreement to arbitrate. [Citation.] The doctrine of equitable estoppel is one of the exceptions. [Citation.] [¶] 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.” (Boucher [v. Alliance Title Co, Inc. (2005) ] 127 Cal.App.4th [262,] 271 [25 Cal.Rptr.3d 440] [ (Boucher) ]; Goldman [v. KPMG, LLP (2009) ] 173 Cal.App.4th [209,] 217-218 [92 Cal.Rptr.3d 534] [ (Goldman) ].) “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.” (Boucher, supra, 127 Cal.App.4th at p. 272 [25 Cal.Rptr.3d 440]; Goldman, supra, 173 Cal.App.4th at p. 220 [92 Cal.Rptr.3d 534].)’ [Citation.] [¶] ‘Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.’ [Citation.] ‘ “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.” ’ [Citations.] ‘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 bound 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 sales contract, we examine the facts of the operative complaint. [Citation.]” (Id., at pp. 495-496; Italics in Felisilda.)
Glassburg v. Ford Motor Co., (C.D. Cal. Nov. 2, 2021) 2021 WL 5086358,
at page 3 (Glassburg), states, “Ford
argues that Felisilda v. FCA US LLC, 53 Cal. App. 5th 486 (2020) compels a different result, but Ford is mistaken.
In Felisilda, the consumer had originally brought their
claim against both the dealer and the manufacturer. [Citation.] This
difference is key. The existence of a claim against the dealer makes Felisilda inapposite because the claim against
the dealer brought the Felisildas' claim within the scope of the arbitration
agreement, that is, within the class of claims described by the arbitration
agreement as arbitrable. [Citation.] (‘[T]he 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.” (emphasis
added)). Because the Felisildas initially brought their claim against both
the dealer and the manufacturer, their dispute was one that “include[d] third
parties.’ [Citation.] The Court based its conclusion that equitable
estoppel applied primarily on the fact that the Felisildas' claim against the
manufacturer fell within the scope of the operative arbitration
clause. [Citation.]”
Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950 (Ngo), “BMW alternatively argues that it need not meet the Kramer standard because equitable estoppel under California law was broadened by a recent decision: Felisilda v. FCA US LLC, 53 Cal. App. 5th 486, 266 Cal.Rptr.3d 640 (2020). We disagree. [¶] The plaintiffs in Felisilda purchased a used 2011 Dodge Grand Caravan from the Elk Grove Dodge dealership and signed a purchase agreement containing an arbitration provision that was virtually identical to the one Ngo signed. [Citation.] After discovering ‘serious defects’ with the car, the Felisildas sued both the dealership and the manufacturer. [Citation.] The dealership moved to compel arbitration. [Citation.] After the manufacturer filed a notice of non-opposition, the trial court compelled arbitration. [Citation.] The Felisildas then dismissed the dealership and the district court ordered it to arbitrate with the manufacturer alone. [Citation.] The California Court of Appeal affirmed. [Citation.] [¶] It makes a critical difference that the Felisildas, unlike Ngo, sued the dealership in addition to the manufacturer. In Felisilda, it was the dealership—a signatory to the purchase agreement—that moved to compel arbitration rather than the non-signatory manufacturer. [Citation.] Furthermore, the Felisildas dismissed the dealership only after the court granted the motion to compel arbitration. Accordingly, Felisilda does not address the situation we are confronted with here, where the non-signatory manufacturer attempted to compel arbitration on its own. We therefore decline to affirm on the ground of equitable estoppel.” In Ngo, “Ngo’s complaint named only BMW as a defendant.” (Id., at p. 945.)
Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229, provides, “And, of course, 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. [Citation.]”
The court finds Glassburg and Ngo distinguished Felisilda. Unlike Felisilda, the signatory dealership was not a party to the actions in Glassburg and Ngo. Similarly, Hardin Hyundai is not a party to this action. The RISC expressly authorizes Plaintiff or Harding Hyundai to enforce the arbitration provision. The RISC does not authorize a manufacturer to enforce the arbitration provision. In Felisilda, the signatory, Elk Grove Dodge, was a party to the action and moved to compel arbitration. The manufacturer did not move to compel arbitration. Felisilda did not address the issue as to whether a non-signatory could enforce the arbitration provision in the absence of the signatory as a party. Plaintiffs’ claims do not fall within the scope of the arbitration provision because there is not dispute between Plaintiff’s and Hardin Hyundai. Since there is no claim or dispute as to RWH, there is an insufficient basis for finding that claims or disputes between RWH and Plaintiff relate to their relationship with Defendant who is a non-signatory.
Therefore, the court finds that equitable estoppel does not apply to allow Defendant, as a non-signatory to the RISC, to enforce the arbitration provision in the RISC.
Third Party Beneficiary:
Defendant states, “HMA can enfoce the arbitration provisoin I the RISC as a third-party beneficiary.” (Motin; 5:24.) As to the third-party beneficiary issue, Souza v. Westlands Water District (2006) 135 Cal.App.4th 879, 891 (Souza) states, “ ‘ “The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation.] If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.” [Citation.]’ [Citation.] A party need not show that it was intended to benefit as an individual and may prevail by showing that it is a member of a class the parties intended to benefit. [Citation.] At the same time, it is not enough that the third party would incidentally have benefited from performance. [Citations.] ‘The circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement. The contracting parties must have intended to confer a benefit on the third party.’ [Citation.] In determining whether the contract contemplates a benefit to the third party, the court must read the contract in light of the circumstances in which the parties entered into it. [Citation.]”
Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 829-830 (Goonewardene), explains, “Although our past decisions have at times referred to and invoked the creditor-beneficiary and donee-beneficiary labels [citation], this court has not relied primarily on those categories or the Restatement formulations in the numerous cases in which we have discussed and applied the third party beneficiary doctrine. Instead, a review of this court's third party beneficiary decisions reveals that our court has carefully examined the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party action to go forward.” (Footnote 5 omitted.)
Here, nothing in the RISC or the arbitration provision shows that it was made for the benefit of Defendant. The terms of the agreement are clear in that they repeatedly grant only “you” (the Plaintiffs) and “us” (the Seller, and its employees, agents, successors or assigns) the right to compel arbitration. These defined terms do not suggest the parties also intended to provide a benefit to Defendant by allowing Defendant to compel arbitration against Plaintiff. Further, a buyer entering into the RISC would not, by its terms, expect that the buyer was granting Defendant a right to compel arbitration, or conferring the benefit of compelling arbitration on Defendant. Therefore, the court finds that the RISC does not contemplate providing a benefit to Defendant.
Based on the above, the court DENIES Defendant’s (Hyundai Motor America) Motion to Compel Binding Arbitration filed on 4-15-22 under ROA No. 23.
Plaintiff is to give notice.