Judge: Yolanda Orozco, Case: 21STCV04704, Date: 2023-01-12 Tentative Ruling
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Case Number: 21STCV04704 Hearing Date: January 12, 2023 Dept: 31
MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS¿¿
TENTATIVE RULING
Defendant Nissan North America Inc.’s Motion to Compel
Arbitration and Stay Proceedings is DENIED.
Background
On February 05, 2021, Plaintiffs Briana M.
Reyes and Carlos Aguilar filed a Complaint against Defendant Nissan North
America, Inc. (“Nissan”) for violations of the Song-Beverly Act.
On December 14, 2022, Nissan moved to
compel arbitration and stay proceedings.
Plaintiff filed opposing papers on
December 30, 2022.
Nissan filed a reply on January 05, 2023.
Legal Standard
Parties may be compelled to arbitrate a dispute upon the
court finding that: (1) there was a valid agreement to arbitrate between the
parties; and (2) said agreement covers the controversy or controversies in the
parties’ dispute.¿(Code Civ. Proc., § 1281.2; Omar v. Ralphs Grocery Co.
(2004)¿118 Cal.App.4th 955, 961.)¿¿
¿¿¿
A party petitioning to compel arbitration has the burden of
establishing the existence of a valid agreement to arbitrate and the party
opposing the petition has the burden of proving, by a preponderance of the
evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v.
Superior Court¿(1998) 62 Cal.App.4th 348, 356-57.)¿¿¿
¿¿
“If a court of competent jurisdiction, whether in this
State or not, has ordered arbitration of a controversy which is an issue
involved in an action or proceeding pending before a court of this State, the
court in which such action or proceeding is pending shall, upon motion of a
party to such action or proceeding, stay the action or proceeding until an
arbitration is had in accordance with the order to arbitrate or until such
earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)¿¿
Request for Judicial Notice
The Court may take judicial notice of
records of any court of record of the United States. (Evid. Code, § 452(d)(2).)
However, the court may only judicially notice the existence of the record, not
that its contents are the truth. (Sosinsky v. Grant (1992) 6 Cal.App.4th
1548, 1565.)
Defendant Nissan requests Judicial Notice
of the following:
1.
Complaint for Damages, filed in Los Angeles County
Superior Court by Briana M. Reyes and Carlos Aguilar on February 5, 2021, in
the matter of Briana M. Reyes, et al. v. Nissan North America, Inc.
(Case No. 21STCV04704), a true and correct copy of which is attached to this
request as Exhibit 1. Exhibit 1 omits the exhibit attached thereto, which is in
the Court’s records and files.
2.
Answer to Plaintiffs’ Complaint, filed in Los
Angeles County Superior Court by Nissan on March 12, 2021, in the matter of Briana
M. Reyes, et al. v. Nissan North America, Inc. (Case No. 21STCV04704), a
true and correct copy of which is attached to this request as Exhibit 2.
3.
Notice of Entry of Dismissal and Proof of Service,
filed in Sacramento County 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), a true and correct copy of
which is attached to this request as Exhibit 3.
Defendant’s request for Judicial Notice is
GRANTED.
Plaintiff requests Judicial Notice of the
following:
1.
The Ninth’s Circuit, February 12, 2022, Opinion,
in Ngo v. BMW of North America, LLC et al., (9th Cir. 2022) 23 F.4th
942. attached as Exhibit 1 hereto.
Plaintiff’s
request for Judicial Notice is GRANTED.
Discussion
Defendant Nissan North America, Inc. (“Nissan”) seeks an Order Compelling Plaintiffs to arbitrate their claims and stay proceedings.
Existence of an Arbitration Agreement
Nissan asserts that on August 11, 2019, Plaintiffs leased a
new 2019 Nissan Pathfinder 2WD (the “subject vehicle’) and executed a Lease Agreement
that contained an arbitration clause. (Liss Decl. Ex. 4)
“ARBITRATION CLAUSE
PLEASE REVIEW – IMPORTANT – AFFECT YOUR LEGAL RIGHTS
1. EITHER
YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE, EXCEPT AS STATED BELOW, 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 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.”
(Liss Decl. Ex. 4]
The arbitration clause further provides:
“Except as otherwise state below, any claim or dispute, whether in contract, tort or statute or otherwise (including the interpretation and scope of this clause and the arbitrability of the claim or dispute), between you and us or our employees, agents, successor or assigns, which arise or relate to your credit application, lease or condition of the vehicle, this lease agreement or any resulting transaction or relationship (including any such relationship with third parties who do not sign this lease) 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 Clause shall not apply to such claim or dispute.”
(Liss Decl. Ex. 4.)
Plaintiffs do not dispute that they signed the Lease Agreement with the arbitration clause or that the Federal Arbitration Act (FAA) governs the agreement to arbitrate. Accordingly, Nissan has met the burden of showing that an agreement to arbitrate exists.
However, the Plaintiffs assert that Nissan lacks standing to compel arbitration as a third-party beneficiary and under the doctrine of equitable estoppel. More importantly, the Plaintiffs argue that Nissan has waived its right to compel arbitration. Before the Court can decide the issue of waiver, the Court must first find that Nissan has standing to compel arbitration.
Nissan
is a Third-Party Beneficiary to the Lease Agreement
Nissan may compel arbitration as a third-party beneficiary to the arbitration provision. (See¿Ronay Family Limited Partnership v. Tweed¿(2013) 216 Cal.App.4th 830, 839 [holding that an arbitration provision can be enforced by a third-party beneficiary even when its name does not appear in the agreement].)
Plaintiffs ask the Court to apply holding in Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942 and find that Nissan is not a third-party beneficiary under federal law. In Felisilda v. FCA US LLC (2020), the Appeal Court interpret a similar arbitration provision such as the one at issue in this instant 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.” (Felisilda v. FCA US LLC¿(2020) 53 Cal.App.5th 486, 490.) Although the plaintiffs in Felisilda do not appear to have raised the argument that the phrase constituted a choice-of-law provision, the Felisilda Court did not treat the provision as such. Therefore, the Court declines to apply federal law to determine if Nissan is a third-party beneficiary to the Lease Agreement.
“[A]lthough ‘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.’” (Felisilda, supra, 53 Cal.App.5th at 497, citing Alan v. Superior Court¿(2003) 111 Cal.App.4th 217, 229.) For this reason, the Court will apply the holding in Felisilda since the arbitration clause at issue mirrors the arbitration language in the Felisilda case and the finding that Nissan is a third-party beneficiary. (See (Felisilda, supra, 53 Cal.App.5th 486.)
In Felisilda, the Appeal Court analyzed an arbitration provision with language that is substantially similar to the arbitration clause at issue in this instant action and found the language to be broad enough to be enforceable “even against third party nonsignatories to the sales contract.” (Felisilda, supra, 53 Cal.App.5th at 486.) The Felisilda Court explained that the arbitration provision contained “an express extension of arbitration to claims involving third parties that relate to the vehicle's condition.¿The express language of the arbitration agreement in [Felisilda] sets it apart from the arbitration provisions in the¿[Soto v. American Honda Motor Co.¿(N.D. Cal. 2012) 946 F.Supp.2d 949] and [Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122] decisions.” (Id. at 498.)
Similarly, the Court finds that the language of the
arbitration clause at issue in this case is broad enough to encompass any
disputes Plaintiffs may have against the manufacturer:
“[A]ny claim or dispute, whether in
contract, tort or statute or otherwise (including the interpretation and scope
of this clause and the arbitrability of the claim or dispute), between you and us or our employees, agents, successor or
assigns, which arise or relate to your credit application, lease or condition
of the vehicle, this lease agreement or any resulting transaction or
relationship (including any such relationship with third parties who do
not sign this lease) shall, at your or our election, be resolved by neutral
binding arbitration and not by a court action.”
(Liss
Decl. Ex. 4 [bold added].)
Accordingly, the language in the arbitration clause supports a finding that Nissan was an intended beneficiary of the Lease Agreement and has standing to enforce the arbitration clause.
Since the Court finds that Nissan has standing to compel
arbitration, the Court need not decide if Nissan has standing to compel
arbitration under the doctrine of equitable estoppel.
Nissan
has Waived the Right to Compel Arbitration
Plaintiffs raise the argument that Nissan has waived any right to compel arbitration by engaging in conduct inconsistent with the intent to arbitrate and unreasonably delaying in bringing this Motion.
“[Q]uestions of waiver are for the court rather than the arbitrator[.]” (Wagner Const. Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 28; see also Code Civ. Proc., § 1281.2 subd. (a).) “The question of waiver is generally a question of fact, and the trial court's finding of waiver is binding on [appeal] if it is supported by substantial evidence.” (Bower v. Inter-Con Security Systems, Inc.¿(2014) 232 Cal.App.4th 1035, 1043.)
Since neither party disputes that the FAA governs the arbitration provision, the FAA and federal control the inquiry of whether Nissan has waived its right to arbitrate this dispute. (See Davis v. Shiekh Shoes, LLC¿(2022) 84 Cal.App.5th 956 (Davis); see also Aviation Data, Inc. v. American Express Travel Related Services Co., Inc.¿(2007) 152 Cal.App.4th 1522, 1535–1536.)
The United States Supreme Court has stated that the federal policy favoring the enforcement of arbitration agreements is based on the enforcement of contract and not the preference for arbitration as an alternative dispute resolution forum. (See Dean Witter Reynolds, Inc. v. Byrd¿(1985) 470 U.S. 213, 219 [“The legislative history of the Act establishes that the purpose behind its passage was to ensure judicial enforcement of privately made agreements to arbitrate. We therefore reject the suggestion that the overriding goal of the Arbitration Act was to promote the expeditious resolution of claims.].)
“‘Thus, the question of whether there has been waiver in the arbitration agreement context should be analyzed in much the same way as in any other contractual context. The essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right.’” (Davis, supra, 84 Cal.App.5th 956 citing National Foundation for Cancer Research v. A.G. Edwards & Sons, Inc.¿(D.C. Cir. 1987) 821 F.2d 772, 774.)
In Morgan v. Sundance, Inc.¿(2022), the United States Supreme Court held that prejudice is not a condition to be considered in finding that a party waived its right to compel arbitration under the FAA. (Morgan v. Sundance, Inc.¿(2022) 212 L.Ed.2d 753 [“[T]he usual federal rule of waiver does not include a prejudice requirement.].) In Davis, the Appeal Court found that the waiver test articulated by the California Supreme Court in St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 which was adopted from the Tenth Circuit’s opinion in Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464, is the correct test to apply to the question of waiver “minus the prejudice requirement.” (Davis, supra, 84 Cal.App.5th 956.) As found in Davis, the St.Agnes/Peterson waiver “test is substantially similar to the test adopted by most federal circuit courts.” (Id.; see also Zamora v. Lehman (2010) 186 Cal.App.4th 1, 21–22.)
The St.Agnes/Peterson factors to assess claims of waiver are:
(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; and
(5) whether important intervening steps [e.g., taking
advantage of judicial discovery procedures not available in arbitration] had
taken place.
(See Davis, supra, 84 Cal.App.5th 956; St. Agnes, supra, 31 Cal.4th at 1196; Peterson, supra, 849 F.2d at 467-468.)
Nissan has taken the following actions that are inconsistent with the right to arbitrate. Nissan filed an Answer asserting arbitration as an affirmative defense but delayed taking any action to compel arbitration for more than a year and only when trial preparation had already commenced.
Nissan also acted inconsistently with its intent to arbitrate by unreasonably delaying in bringing this Motion. Joint Witness and Exhibit Lists and Jury Instructions have been filed. Discovery has closed. The jury trial is scheduled on February 6, 2023. Not only has the litigation machinery been already substantially invoked, but it is also close to being finished once the trial concludes.
In addition, Nissan moved to compel arbitration close to the start of trial and a year and 10 months after this action was filed. Nissan does not explain the delay in its moving papers. Although Nissan did not file a counterclaim, important intervening steps such as judicial discovery have already concluded, and the parties have started trial preparation.
Nissan’s reliance on Quach v. California Commerce Club¿(Cal. 2022) 297 Cal.Rptr.3d 592 is unavailing because the California Supreme Court has granted review of that opinion. While Quach may be cited for its persuasive value, other appellate cases have upheld waiver even where the has been “no judicial litigation of the merits of arbitrable issues.” (Id. at 478.)
Cases have found waiver where the party unreasonably delayed in moving to compel arbitration and the parties had engaged in discovery. (Garcia v. Haralambos Beverage Co.¿(2021) 59 Cal.App.5th 534, 543 [waiver of the right to arbitrate was upheld where the party waited twenty-four months before filing its motion to compel arbitration and engaged in actions inconsistent with the right to arbitrate]; Bower v. Inter-Con Security Systems, Inc.¿(2014) 232 Cal.App.4th 1035, 1046 [waiver upheld where party delayed bringing a motion to compel by nineteen months and had propounded discovery]; Kokubu v. Sudo¿(2022) 76 Cal.App.5th 1074, 1087 [party delayed by sixteen months in bringing a motion to compel and took advantage of judicial discovery procedures not available in arbitration]; Fleming Distribution Company v. Younan¿(2020) 49 Cal.App.5th 73, 83 [finding a twenty-month delay in seeking arbitration was unreasonable]; Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass'n)¿(1998) 61 Cal.App.4th 980 [affirmed waiver due to ten-month delay in seeking arbitration after parties had engaged in expansive discovery and trial preparation].)
Unquestionably, Nissan unreasonably delayed by waiting 1 year and 10 months to bring this Motion and offering no explanation for the delay.
For the reasons stated, the Court finds that there is substantial evidence to support the finding that Nissan waived its right to compel arbitration under the St.Agnes/Peterson factors.
The Motion is DENIED.
Conclusion
Defendant Nissan North America Inc.’s Motion to Compel
Arbitration and Stay Proceedings is DENIED.
Moving party to give notice.