Judge: William A. Crowfoot, Case: 22STCV09026, Date: 2022-08-10 Tentative Ruling

Case Number: 22STCV09026    Hearing Date: August 10, 2022    Dept: 27

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

I.         BACKGROUND

A. The Original Complaint and First Amended Complaint

On March 14, 2022, plaintiff Melanie Pearl (“Plaintiff”) filed this action against defendants FCA US LLC dba JEEP (“FCA”); Enterprise Rent-A-Car Co of San Francisco, LLC (“Enterprise SF”); Enterprise Car Sales; Henley Pacific LA, LLC dba Valvoline Instant Oil Change, erroneously sued as Valvoline Instant Oil Change (“Henley Pacific”); Complete Automotive Systems (“CAS”), Ceja Quality Tires (“Ceja”); and Nancy Wender (“Wender”), asserting causes of action for (1) general negligence, (2) products liability-negligence, (3) products liability-failure to warn, (4) products liability-strict liability, (5) products liability-breach of warranties, and (6) products liability-misrepresentation and concealment.

          On May 13, 2022, defendant Henley Pacific filed a demurrer with a motion to strike Plaintiff’s Complaint.

          On June 28, 2022, the Court held a hearing on the demurrer with motion to strike. The Court granted the motion to strike Plaintiff’s request for attorney’s fees in the Complaint as well as her allegations of alter ego and joint venture liability. (Minute Order, dated June 28, 2022 (“June 28 Order”), p. 4, last paragraph.) The Court also sustained Henley Pacific’s demurrer because the Complaint, as pleaded, did not show that the defendant owed Plaintiff a duty. (June 28 Order, p. 4, second to the last paragraph.) The Court sustained the demurrer with 30 days’ leave to amend. (June 28 Order, p. 5, second to the last paragraph.)

On July 19, 2022, Plaintiff filed a First Amended Complaint (“FAC”).

          On May 27, 2022 (before the Court held a hearing on Henley Pacific’s demurrer), defendants Enterprise SF and Enterprise Car Sales (collectively, the “Enterprise Defendants”) filed the instant motion to compel arbitration and stay proceedings directed at the original Complaint.

“An ‘amended’ complaint supersedes all prior complaints. ‘“It alone will be considered by the reviewing court.”’ [Citations.] The original ceases to ‘“perform any function as a pleading.”’ [Citations.]” (Lee v. Bank of America (1994) 27 Cal.App.4th 197, 215.)

          Here, the FAC superseded the original Complaint. However, the FAC’s allegations against the Enterprise Defendants, FCA, and Wender are the same as the ones in the original Complaint. Therefore, the Court will take the instant motion to compel arbitration as being directed at the FAC instead of the original Complaint.

          B. Allegations in the FAC

          The FAC asserts causes of action for (1) general negligence, (2) products liability-negligence, (3) products liability-failure to warn, (4) products liability-strict liability, (5) products liability-breach of warranties, and (6) products liability-misrepresentation and concealment.

          The FAC alleges the following. On December 3, 2021, Plaintiff was involved in a vehicular crash with defendant Wender. (FAC, ¶ 16.) At the time of the collision, Plaintiff was operating a Jeep Grand Cherokee Limited (“Jeep”), which had defective airbags that did not deploy in the crash, thereby causing and/or contributing to her injuries. (FAC, ¶¶ 16, 18.) Plaintiff purchased the Jeep from the Enterprise Defendants. (Compl., ¶ 19.) However, the Enterprise Defendants neglected to properly inspect the vehicle before selling it to Plaintiff and failed to scan the vehicle identification number for potential recalls. (Compl., ¶ 19.) In addition, FCA manufactured, designed, distributed, marketed, and/or retailed the Jeep as safe. (FAC, ¶ 18.) However, the Jeep was not safe and was subject to recalls even though no recall notice was sent to Plaintiff. (FAC, ¶ 18.)

          C. Filing Dates of the Moving, Opposition, and Reply Papers

On May 27, 2022, the Enterprise Defendants filed the instant motion to compel arbitration and stay proceedings (the “Motion”).

On June 9, 2022, defendant FCA filed a “Response” to the Motion.

On June 9, 2022, Plaintiff filed her opposition (titled “First Amended Opposition”) to the Motion.

On June 13, 2022, Plaintiff filed her objection to FCA’s “Response.”

On June 9, 2022, defendant Wender filed her opposition to the Motion.

On July 6, 2022, the Enterprise Defendants filed their reply.

On August 3, 2022, Wender filed a supplemental opposition to the Motion.

II. EVIDENTIARY OBJECTIONS

On June 8, 2022, Plaintiff filed objections to the Enterprise Defendants’ evidence (specifically, the declaration of Chad Iken (“Iken”) filed May 27, 2022). On June 9, 2022, defendant Wender filed a joinder to Plaintiff’s objections to Iken’s declaration.

The Court rules on the objections as follows:

          Objection Nos. 1-3, 4: OVERRULED.

Objection Nos. 5 and 6: SUSTAINED, on lack of personal knowledge and foundation grounds for the reasons explained below.

An affiant must “provide the requisite preliminary facts to show she had personal knowledge about what she said in those paragraphs.” (See Evid. Code, §§ 403, subd. (a)(2), 702, subd. (a) [‘“[T]he testimony of a witness concerning a particular matter is inadmissible unless he has personal knowledge of the matter. Against the objection of a party, such personal knowledge must be shown before the witness may testify concerning the matter.”’].) [Footnote Omitted.]” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 169 (“Gamboa”).)

“[B]oilerplate sentence, ‘If called as a witness I could and would competently testify under oath to the above facts which are personally known to me,’ is not sufficient to establish personal knowledge. (Snider v. Snider (1962) 200 Cal.App.2d 741, 754, 19 Cal.Rptr. 709 [‘“Where the facts stated do not themselves show it, such bare statement of the affiant has no redeeming value and should be ignored.”’].)” (Gamboa, supra, 72 Cal.App.5th at p. 169.)

          Here, as the Court will explain further under the “Discussion” section of this ruling, Iken’s declaration lacks foundational facts showing that he has personal knowledge regarding how Plaintiff allegedly entered into the Retail Installment Sale Contract (let alone the purported arbitration agreement) on November 4, 2020.

In addition, contrary to the Enterprise Defendants’ argument, the Court does not find that Iken’s declaration establishes that the Retail Installment Sale Contract falls under the business records exception of the hearsay rule.

The business records exception provides: “Evidence of a writing made as a record of an act … is not made inadmissible by the hearsay rule when offered to prove the act … if: ¶ (a) The writing was made in the regular course of business; ¶ (b) The writing was made at or near the time of the act …; ¶ (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and ¶ (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness.” (Evid. Code, § 1271 [emphasis added].)

Here, Iken states in a conclusory manner that all of Enterprise SF’s records related to its sale of a 2019 Jeep Grand Cherokee to Plaintiff on November 4, 2020, were “(a) made at or near the time of occurrence of the matters set forth thereby and (b) made and kept in the regular course of business.” (Iken Decl., ¶ 5.) However, Iken does not explain the “mode of preparation” of the Retail Installment Sale Contract, or include facts showing the “sources of information and method and time of preparation” to prove the contract’s trustworthiness.

Accordingly, the Enterprise Defendants have failed to provide evidence showing that the Retail Installment Sale Contract is a business record under Evidence Code section 1271.

III.      LEGAL STANDARD

Both the California Arbitration Act and the Federal Arbitration Act (“FAA”) “are driven by a strong public policy of enforcing arbitration agreements.” (Weiler v. Marcus & Millichap Real Estate Investment Services, Inc. (2018) 22 Cal.App.5th 970, 979.) “Thus, a court generally must compel arbitration in accordance with the agreement when requested by one of the parties. (Code Civ. Proc., § 1281.2; 9 U.S.C. § 2.)” (Ibid.) Section 2 of the FAA provides: “A written provision in ... a contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.)

The FAA “applies to arbitration provisions in contracts involving interstate commerce.” (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247; 9 U.S.C. § 2.) “‘[T]he phrase ‘“‘involving commerce’”’ in the FAA is the functional equivalent of the term ‘“‘affecting commerce,’”’ which is a term of art that ordinarily signals the broadest permissible exercise of Congress’s commerce clause power.’ [Citations.]” (Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 238.)

“The court’s role under the [FAA] is … limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Chiron Corp. v. Ortho Diagnostic Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) “If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms.” (Ibid.)

“In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 [emphasis added].)

IV. DISCUSSION

Under the FAA, “enforceability of an arbitration agreement is ordinarily to be determined by the court.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 781.) However, “parties may agree to have an arbitrator decide not only the merits of a particular dispute but also ‘“‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.”’ [Citation.]” (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 772 [emphasis added].) 

However, even when parties (like the Enterprise Defendants) argue that the parties agreed to arbitrate the gateway questions of arbitrability under an arbitration agreement governed by the FAA, “‘before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists. See 9 U.S.C. § 2.’” (Trinity v. Life Ins. Co. of North America (2022) 78 Cal.App.5th 1111, 1122 [emphasis added].) Once a court determines that a valid agreement exists and finds that the “‘agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue.’ [Citation.]” (Ibid.)

Under California law, “[t]he burden of persuasion is always on the moving party to prove the existence of an arbitration agreement with the opposing party by a preponderance of the evidence ….” (Gamboa, supra, 72 Cal.App.5th at pp. 164–165.)

“However, the burden of production may shift in a three-step process.” (Gamboa, supra, 72 Cal.App.5th at p. 165.)

“First, the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’ [Citation.]” (Gamboa, supra, 72 Cal.App.5th at p. 165.) “The moving party ‘can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.’ [Citation.]” (Ibid.) “Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion.” (Ibid.) “For this step, ‘it is not necessary to follow the normal procedures of document authentication.’ [Citation.] If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Ibid.)

Here, the Enterprise Defendants not only attached a copy of the Retail Installment Sale Contract (which contains the purported arbitration agreement), but have also set forth the arbitration agreement’s provisions in their motion. (See Iken Decl., Exhibit A – a copy of the Retail Installment Sale Contract; declaration of Linda C. Hsu, Exhibit A [same]; Motion, pp. 6:22-7:1 (emphasis removed) [“Plaintiff entered into a valid agreement to arbitrate her claims against Enterprise SF when she signed and accepted the Agreement to Arbitrate and the associated Arbitrated Provision contained in the Sale Contract. The Arbitration Provision provides that ‘“[a]ny claim or dispute, whether in contract, tort, statute or otherwise … which arises out of relates to your [Plaintiff’s] credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship … shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.’ Iken Decl., Ex. A, p. 7 …”].)

The Court notes that at the bottom right of the Retail Installment Sale Contract, it stated:

Agreement to Arbitrate: By 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.

(Iken Decl., Exhibit A, p. 1, bottom right corner.) Below that paragraph, there is a signature next to the phrase “Buyer Signs,” but no printed name. However, at the top of the first page of the contract, it says that the buyer’s name – Melanie M Pearl – which matches Plaintiff’s name. The buyer signed at the bottom of the arbitration provision on Page 7 (the “Arbitration Agreement”) of the Retail Installment Sale Contract.

Accordingly, under the prima facie standard articulated in Gamboa, the Court finds that the Enterprise Defendants have met their burden of producing prima facie evidence of a written agreement to arbitrate the controversy between them and Plaintiff.

“If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal.App.5th at p. 165.) “The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.” (Ibid. [emphasis added].)

For example, in the 2021 case Gamboa, the Court of Appeal found that the plaintiff “met her burden on the second step by filing an opposing declaration, saying she did not recall the agreement and would not have signed it if she had been aware of it: ‘I do not remember these documents at all .... Had I been made aware of the existence of an arbitration agreement, and been explained its provisions, I would not have signed any such documents.’” (Gamboa, supra, 72 Cal.App.5th at p. 167.)

Here, Plaintiff declares the following under the penalty of perjury. “At the time of sale, I did sign a bunch of papers. [However] I was not given copies of anything that bore my signature. The papers were signed rapidly, and I was given no opportunity to read them nor negotiate any terms listed in the papers. I did not discuss anything about arbitration with the salesperson or the other personnel at ENTERPRISE. I do not believe that I ever met with, nor dealt in any manner with, someone by the name of Chad Iken.” (Declaration of Melanie Pearl, filed June 8, 2022 (“Pearl Decl.”), ¶ 3.) Moreover, the only two documents she received (“Powertrain Limited Warranty” and “Buyers Guide, Dealer Warranty”) did not have any arbitration clauses in them. (Pearl Decl., ¶¶ 5-6.)

In Gamboa, the Court of Appeal held it did not need to “decide whether [the plaintiff] challenged the authenticity of her purported signature on the arbitration agreement” because “[i]t was enough that [the plaintiff] challenged the authenticity of the agreement by saying under penalty of perjury that she did not remember it.” (Gamboa, supra, 72 Cal.App.5th at p. 168.)

Here, the Court finds that Plaintiff has met her burden of producing evidence challenging the authenticity of the Arbitration Agreement by declaring under penalty of perjury that she was not given the opportunity to read what she was signing and never received copies of the Retail Installment Sale Contract (which included the Arbitration Agreement). In other words, Plaintiff implies that she does not know whether she signed or agreed to the Arbitration Agreement.

“If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party.” (Gamboa, supra, 72 Cal.App.5th at pp. 165–166.)

In Gamboa, the Court of Appeal held that the trial court correctly found that the defendant (a clinic) did not meet its burden to show that a contract was formed. “The Clinic presented no evidence that [the plaintiff Hope Gamboa (“Gamboa”)] saw or signed the arbitration agreement because the court sustained Gamboa’s objections to the Clinic's proffered evidence.” (Gamboa, supra, 72 Cal.App.5th at p. 168.) “Gamboa made several objections to” the declaration of Marina Lopez (the clinic’s director of human resources, “Lopez”), “its four individual paragraphs and the attached arbitration agreement, all of which the court sustained.” (Id. at p. 169.)

“In essence, the Clinic’s proffered evidence was inadmissible because it lacked foundational facts.” (Gamboa, supra, 72 Cal.App.5th at p. 169 [emphasis added].)

First, Lopez asserted that the clinic employed Gamboa, and the arbitration agreement was in effect during Gamboa’s employment, but she “did not provide the requisite preliminary facts to show she had personal knowledge about what she said in those paragraphs.” (Ibid. [emphasis added].) Indeed, Lopez’s boilerplate sentence that she had “the above facts …[were] personally known to [her]” was insufficient to establish personal knowledge. (Ibid.)

Second, “the declaration’s first paragraph (that Lopez was the human resources director) by itself was irrelevant.” (Ibid.)

“Finally, the arbitration agreement was never authenticated. (See Evid. Code, §§ 403, subd. (a)(3), 1400, 1401 [‘Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.’].)” (Ibid.) The main takeaway from Gamboa is that Lopez’s declaration lacked foundational facts because Lopez “did not explain how she knew Gamboa had seen, much less signed, the arbitration agreement.” (Ibid.)

“In sum, once Gamboa produced evidence challenging the authenticity of the purported arbitration agreement, the Clinic was required to rebut the challenge by establishing by a preponderance of the evidence that the agreement was valid. The Clinic did not have to authenticate Gamboa's signature on the arbitration agreement. The Clinic could have met its burden in other ways, including a declaration from the Clinic’s custodian of records. But proferring [sic] no admissible evidence was insufficient.” (Gamboa, supra, 72 Cal.App.5th at p. 171.)

Here, Iken’s declaration only establishes that Iken has personal knowledge of Enterprise SF records. However, like the director of human resources (Lopez) in Gamboa, Iken fails to explain in his declaration how he knows Plaintiff had seen, much less signed, the Arbitration Agreement.

Accordingly, the Court finds that the Enterprise Defendants have not met their burden of proving by a preponderance of the evidence the validity Arbitration Agreement.

For the reasons set forth above, the Court denies the motion. Therefore, the Court need not address the arguments raised in defendant Wender’s opposition or defendant FCA’s “Response” to the Motion.

V.        CONCLUSION

The Motion to Compel Arbitration and Stay Proceedings is DENIED.

Moving parties to give notice. 

            Parties who intend to submit on this tentative must send an email to the Court at SSCDEPT27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court’s website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.