VLADIMIR OUZDIN VS BMW OF NORTH AMERICA LLC

Tentative Rulings

Case Number: ****6084    Hearing Date: November 24, 2020    Dept: 20

Tentative Ruling

Judge David J. Cowan

Department 20

Hearing Date: Tuesday, November 24, 2020

Case Name:     Vladimir Ouzdin v. BMW of North America, LLC

Case No.:    ****6084

Motion:       Compel Arbitration

Moving Party:     Defendant BMW NA

Responding Party: Plaintiff Ouzdin

Notice: OK

Ruling: Defendant BMW NA’s Motion to Compel Arbitration is GRANTED.

All matters in this case are now stayed pending arbitration.

BMW to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LA Court Connect rather than in person in view of the COVID-19 pandemic.

BACKGROUND

On December 12, 2017, Plaintiff Vladimir Ouzdin filed a Complaint against Defendant BMW of North America, LLC (“BMW”) and Does 1-10. Plaintiffs alleged several statutory causes of action under the Song-Beverly Act in connection with a vehicle produced by BMW.

On January 16, 2018, Plaintiff filed a First Amended Complaint against Defendants BMW, dealership Sterling BMW (“Sterling”), and Does 1-10, stating the same claims as before in connection with the vehicle manufactured by BMW and sold to Plaintiff by Sterling.

On August 28, 2018, Sterling filed a Motion to Compel Arbitration. BMW joined in part to the extent that it “consented” to arbitration of Plaintiff’s claims against it.

On November 28, 2018, Plaintiff filed an Opposition to Sterling’s Motion. Plaintiff objected to arbitration of its claims against BMW.

On December 4, 2018, Sterling filed a Reply, reiterating that BMW was not seeking to compel arbitration but that judicial economy would be served by joining BMW in arbitration.

On December 11, 2018, the Court granted Sterling’s Motion to Compel Arbitration, but excluded claims against BMW from arbitration. The Court stayed Plaintiff’s claims against BMW pending the Sterling arbitration.

On July 31, 2019, BMW filed a Motion to Compel Arbitration.

On November 22, 2019, Plaintiff submitted a Status Report re: Arbitration stating that “[t]he parties have submitted all necessary documents to JAMS. As of now, the parties are waiting for the JAMS case manager, Rose Mitchell, to provide the next steps.”

On November 26, 2019, the Court vacated BMW’s Motion to Compel Arbitration due to the stay pending arbitration.

On December 17, 2019, Plaintiff filed a Request for Dismissal of his claims against Sterling BMW without prejudice.

On March 13, 2020, Plaintiff filed a Status Report re: Arbitration seeking to lift the stay on his claims against BMW on the ground that Sterling had been dismissed.

On August 27, 2020, the Court lifted the stay pending arbitration.

On August 31, 2020, BMW filed a Motion to Compel Arbitration.

On October 20, 2020, Plaintiff filed an Opposition.

On October 26, 2020, BMW filed its Reply.

On November 2, 2020, the Court heard oral argument on this Motion and continued it to November 24, 2020 for supplemental briefing. The Court indicated any supplemental briefing was due by November 16, 2020. However, neither party filed supplemental briefing.

DISCUSSION

Existence of Agreement to Arbitrate

As a preliminary matter, the party seeking to compel arbitration “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 trial court also typically decides the threshold issues of enforceability of the arbitration agreement and the scope of issues to be arbitrated.  (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 891) When a motion to compel arbitration is brought by or against a nonsignatory, the Court must determine the threshold issue of whether the nonsignatory can be bound by, or receive the benefit of, the arbitration agreement. (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 468) An arbitration agreement cannot bind nonsignatories “absent a judicial determination that the nonsignatory falls within the limited class of third-parties who can be compelled to arbitrate.” (Id.) There is no public policy in favor of compelling arbitration involving nonsignatories. (Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 220)

Issues Already Resolved

Plaintiff argues this Motion is a veiled motion for reconsideration of the Court’s December 11, 2018 Order granting Sterling’s motion to compel arbitration. In connection with that motion, “BMW NA state[d] that in the interest of judicial economy it consent[ed] to have Plaintiff’s claims against it arbitrated as well” but “Plaintiff [did] not consent to arbitration of its claims against BMW NA.” (12/11/18 Order.) The Court found “there [was] no legal basis provided for the Court to order the claims against BMW NA to arbitration,” noting that BMW’s consent was not an adequate because “[t]he Court cannot create contractual obligations between BMW NA and Plaintiff that do not exist, even if BMW NA now consents to arbitration.” The Court reiterated the general rule that the “right to compel arbitration does not exist for non-parties seeking to invoke another party’s right to compel arbitration.” At that time, “BMW NA d[id] not establish it is a third-party beneficiary of the Agreement”; further, there was no evidence of “any intent of Plaintiff or Sterling to benefit BMW NA.” As a consequence the Court declined to compel arbitration of claims against BMW, but stayed those claims pending arbitration of claims against Sterling. The Court granted the motion as to the claims against Sterling.

The stay was lifted on August 27, 2020, and BMW thereafter moved to compel arbitration. The exhibits provided by Plaintiff demonstrate that BMW did not offer any legal or factual argument previously in support of compelling arbitration. In Sterling’s original motion to compel arbitration, BMW merely claimed the Court “may” order that a “willing nonsignatory . . . be included in a binding arbitration of a dispute to which it is a party.” (Sogoyan Decl., Ex. 1 (Sterling Motion to Compel Arbitration); Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477-478.) Sterling’s Reply was crystal-clear that “[o]nly the Dealer, and not BMW NA, seeks to compel arbitration” and “BMW NA is not seeking to compel arbitration.” (Sogoyan Decl., Ex. 3.) At no point did Sterling or BMW argue that BMW is a third-party beneficiary, as BMW now argues. There is no discussion of equitable estoppel.

From the foregoing, it appears the Court previously decided only that (1) BMW’s consent to arbitration was insufficient in the face of Plaintiff’s objections to warrant joining BMW in the arbitration of Plaintiff’s claims against Sterling; and (2) BMW failed to establish any basis to compel arbitration of Plaintiff’s claims. The Court’s review of Sterling’s pleadings indicates BMW never sought to compel arbitration and never argued it was a third-party beneficiary—the Court merely observed there was no showing that was the case.[1] Rather, BMW clearly stated it was not attempting to compel arbitration and merely believed such arbitration would be warranted in the interests of judicial economy. The Court does not need to address issues of judicial economy in deciding this Motion; instead, the Court must determine whether BMW has standing to compel arbitration as a nonsignatory. That issue was not conclusively resolved in the December 11, 2018 Order. Therefore, this is not a veiled motion for reconsideration.

Despite the foregoing, it is unclear to the Court why BMW declined to move to compel arbitration at that time. There is no indication that BMW subsequently discovered new facts it could not have presented previously. Indeed, the Court notes BMW made an attempt to compel arbitration in July 2019 while the arbitration stay was still in place, but BMW’s motion was vacated due to the stay. (See BMW 3/9/20 Status Report.) However, BMW promptly moved to compel arbitration (again) once the stay was lifted and Plaintiff does not contend he was prejudiced by the first arbitration proceeding with Sterling[2] or that BMW has waived its right to compel arbitration. The Court therefore does not further consider this procedural history in resolving the Motion to Compel and addresses the merits. However, if the parties do not submit on the tentative, the Court requests input at the hearing on whether arbitration actually went forward with Sterling and how far the arbitration proceeded. It is unclear to the Court whether it would be equitable to compel Plaintiff to proceed through a second arbitration if Plaintiff already arbitrated once with Sterling; indeed, the additional expenses of a second arbitration would be to some degree attributable to BMW not moving to compel arbitration in 2018.[3]

Nonsignatory Enforcement—Equitable Estoppel

BMW, an undisputed nonsignatory to the Agreement, seeks to compel arbitration (1) as a third-party beneficiary of the Agreement and (2) under the doctrine of equitable estoppel. Normally, a nonsignatory may not compel arbitration or be compelled to arbitrate, but there are various exceptions to this rule. (See Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 268 (identifying five theories under which a nonsignatory can enforce an arbitration clause)) As discussed below, the Court concludes BMW may compel arbitration under the doctrine of equitable estoppel. Therefore, the Court does not reach the third-party beneficiary argument.

Equitable Estoppel

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, supra, at 271; Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 218-19.) “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.” (Id. at 272.) “‘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 her advantage, then attempt to avoid its application in defining the forum in which her dispute . . . should be resolved.’” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496; Jensen v. U-Haul Co. (2017) 18 Cal.App.5th 295, 306.) “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.” (Id.)

Plaintiff argues equitable estoppel does not apply here because Plaintiff’s implied warranty claim “cannot reasonably be said to arise from the lease.” Plaintiff relies largely on Kramer v. Toyota Motor Corp. (9th Cir. 2011) 705 F.3d 1122 and Jurosky v. BMW of North America, LLC (2020) 441 F.Supp.3d 963. Both cases are distinguishable.

In Kramer, the Ninth Circuit rejected Toyota’s equitable estoppel argument because none of the claims in the class action were “intimately founded in and intertwined with” the underlying purchase agreements. (Id. at 1128) The asserted causes of action included violations of consumer protection law, unfair competition law, and false advertising law, none of which were based on purchase agreements but rather on Toyota’s conduct generally in California. The Court also declined to apply equitable estoppel based on a cause of action for breach of the implied warranty of merchantability, finding the purchase agreements “expressly differentiate[d] dealer warranties from manufacturer warranties.” (Id. at 1131) Specifically, one purchase agreement included a provision stating that “this provision does not affect any warranties covering the vehicle that a manufacturer or supplier may provide.” (Id.) Thus, the cause of action based on the manufacturer’s implied warranty was not based on the underlying agreement with the dealer. Finally, the Court found the breach of contract claim did not arise from the purchase agreements because it was actually based on the plaintiffs’ “status as third-party beneficiaries to contracts between Toyota and the Dealership.” (Id.)

In Jurosky,[4] the plaintiff asserted “five causes of action under the Song-Beverly Act, including: (1) failure to promptly replace the vehicle or make restitution; (2) failure to commence repairs within a reasonable time; (3) failure to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs; (4) breach of an express written warranty; and (5) breach of the implied warranty of merchantability,” as well as “one count of common law fraudulent concealment.” (Id. at 970.) The district court found these SBA claims were not “intertwined” with the underlying purchase agreement for two reasons. First, “none of [the claims] reference[d] the purchase agreement.” (Id.) Second, “in order to be intertwined with the purchase agreement, Plaintiff must allege a violation of a ‘duty, obligation, term or condition’ imposed by the purchase agreement.” (Id.; Goldman, supra, 173 Cal.App.4th at 230 (finding no “claim founded in or even tangentially related to any duty, obligation, term or condition imposed by the operating agreements.”)) No such violation was alleged in Jurosky.

Neither Jurosky nor Kramer is on point here. Rather, Felisilda controls. The operative difference between Felisilda and Kramer/Jurosky is “language that could be construed as extending the scope of arbitration to third parties” in the purchase/lease agreement. (Felisilda at 648.) In Kramer, that language did not exist.[5] (Id. at 648 (“The retail sales contracts in Kramer did not contain any language that could be construed as extending the scope of arbitration to third parties.”)) In Jurosky, that language existed, but was not considered. (Id. at 649 (“We decline to follow the Jurosky court's glossing over language in an arbitration clause that expressly includes third party nonsignatories.”))

The Court perceives no distinction between the arbitration language here and in Felisilda. In that case, the arbitration clause applied to “[a]ny 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  . . . 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.” (Id. at 643 (emphasis in original.) By comparison, the arbitration clause here provides that “[a]ny claim or dispute, whether in contract, tort, statute or otherwise . . . between me and you or your employees, agents, successors or assigns, which arise out of or relate to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease) shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Barrett Decl., Ex. A (emphasis added).) The language is virtually identical.

Moreover, the claim asserted in Felisilda is highly similar to the claims asserted here. In Felisilda, the plaintiffs “assert[ed] a single cause of action for violation of the Song-Beverly Act,” alleging that they had “purchased a used 2011 Dodge Caravan . . . and express warranties accompanied the sale of the vehicle to [them] by which FCA . . . undertook to preserve or maintain the utility or performance of [their] vehicle or provide compensation if there was a failure in such utility or performance.” The plaintiffs alleged delivery of the vehicle “with serious defects and nonconformities to warranty” and alleged “develop[ment of] other serious defects and conformities to warranty including, but not limited to, engine, interior, and electrical defects.” Plaintiffs alleged that FCA “failed to either promptly replace the new motor vehicle or promptly make restitution” under the Song-Beverly Act.

Here, Plaintiff asserts five causes of action for violation of the Song-Beverly Act, alleging that he “leased a 2012 BMW 550 . . . which was manufactured and or distributed by Defendant,” and that he “received an express written warranty in which Defendant undertook to preserve or maintain the utility or performance of the Vehicle or to provide compensation if there is a failure in utility or performance for a specified period of time.” (FAC, para. 28-29.) Plaintiff alleges that, during the warranty period, the vehicle “contained and/or developed defects.” (FAC, para. 30.) Plaintiff alleges BMW “and its representatives in this state have been unable to service or repair the vehicle to conform to the applicable express warranties” and further “failed to promptly replace the Vehicle or make restitution” under the Song-Beverly Act. (FAC, para. 31.) These allegations in support of the first Song-Beverly cause of action mirror those in Felisilda.

The Felisilda court concluded that the plaintiffs’ Song-Beverly claim against the manufacturer “directly relate[d] to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Id. at 497.) Under the language of the arbitration clause, the plaintiffs “expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract.” (Id.) Therefore, the court concluded the plaintiffs were “estopped from refusing to arbitrate their claim against” the manufacturer. (Id.) Similarly here, Plaintiff’s Song-Beverly claims relate to defects in the vehicle and BMW’s inability “to serve or repair the vehicle to conform to the applicable express warranties.” (FAC, para. 31.) These warranties were received in connection with the lease agreement. (FAC, para. 29.) Thus, under identical arbitration clause language, Plaintiff similarly “agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories” such as BMW. Felisilda controls and is factually on point.

Kramer, by contrast, is distinguishable both insofar as (1) the arbitration language relied upon did not address third parties (see supra, 705 F.3d at 1124-25) and (2) the plaintiffs did not assert Song-Beverly claims based on express warranties issued in connection with an underlying purchase agreement. (Id. at 1131 (arbitration agreement “expressly differentiate[d] dealer warranties from manufacturer warranties.”)) Here, like in Felisilda and unlike in Kramer, the Song-Beverly claims allege that BMW “violated [express] warranties . . . received as a consequence of the [lease] contract.” The Court has already distinguished Jurosky above.

The Court is unpersuaded by Plaintiff’s argument that the implied warranty claim is not intertwined with the lease agreement. The implied warranty of merchantability clearly relates to the “condition of the vehicle”—as Plaintiff notes, one element of that claim is that the vehicle “was not of the same quality as vehicles generally acceptable in the trade.” (Opposition, p. 9; see CACI 3210.) The implied warranty claim therefore is a claim which “arises out of or relates to . . . [the] condition of this Vehicle.” (Barrett Decl., Ex. A.) As in Felisilda, Plaintiff “expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract” – under identical arbitration clause language. The implied warranty claim is intertwined with the underlying agreement and subject to arbitration.

For the foregoing reasons, the Court finds Plaintiff’s claims against BMW arise from the lease agreement and Plaintiff is “estopped from refusing to arbitrate” the Song-Beverly claims.

CONCLUSION

Defendant BMW NA’s Motion to Compel Arbitration is GRANTED.

All matters in this case are now stayed pending arbitration.

BMW to give notice.

Case Number: ****6084    Hearing Date: November 02, 2020    Dept: 20

Tentative Ruling

Judge David J. Cowan

Department 20

Hearing Date: Monday, November 2, 2020

Case Name:     Vladimir Ouzdin v. BMW of North America, LLC

Case No.:    ****6084

Motion:       Compel Arbitration

Moving Party:     Defendant BMW NA

Responding Party: Plaintiff Ouzdin

Notice: OK

Ruling: Defendant BMW NA’s Motion to Compel Arbitration is GRANTED.

All matters in this case are now stayed pending arbitration.

BMW to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LA Court Connect rather than in person in view of the COVID-19 pandemic.

BACKGROUND

On December 12, 2017, Plaintiff Vladimir Ouzdin filed a Complaint against Defendant BMW of North America, LLC (“BMW”) and Does 1-10. Plaintiffs alleged several statutory causes of action under the Song-Beverly Act in connection with a vehicle produced by BMW.

On January 16, 2018, Plaintiff filed a First Amended Complaint against Defendants BMW, dealership Sterling BMW (“Sterling”), and Does 1-10, stating the same claims as before in connection with the vehicle manufactured by BMW and sold to Plaintiff by Sterling.

On August 28, 2018, Sterling filed a Motion to Compel Arbitration. BMW joined in part to the extent that it “consented” to arbitration of Plaintiff’s claims against it.

On November 28, 2018, Plaintiff filed an Opposition to Sterling’s Motion. Plaintiff objected to arbitration of its claims against BMW.

On December 4, 2018, Sterling filed a Reply, reiterating that BMW was not seeking to compel arbitration but that judicial economy would be served by joining BMW in arbitration.

On December 11, 2018, the Court granted Sterling’s Motion to Compel Arbitration, but excluded claims against BMW from arbitration. The Court stayed Plaintiff’s claims against BMW pending the Sterling arbitration.

On July 31, 2019, BMW filed a Motion to Compel Arbitration.

On November 22, 2019, Plaintiff submitted a Status Report re: Arbitration stating that “[t]he parties have submitted all necessary documents to JAMS. As of now, the parties are waiting for the JAMS case manager, Rose Mitchell, to provide the next steps.”

On November 26, 2019, the Court vacated BMW’s Motion to Compel Arbitration due to the stay pending arbitration.

On December 17, 2019, Plaintiff filed a Request for Dismissal of his claims against Sterling BMW without prejudice.

On March 13, 2020, Plaintiff filed a Status Report re: Arbitration seeking to lift the stay on his claims against BMW on the ground that Sterling had been dismissed.

On August 27, 2020, the Court lifted the stay pending arbitration.

On August 31, 2020, BMW filed a Motion to Compel Arbitration.

On October 20, 2020, Plaintiff filed an Opposition.

On October 26, 2020, BMW filed its Reply.

DISCUSSION

Existence of Agreement to Arbitrate

As a preliminary matter, the party seeking to compel arbitration “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 trial court also typically decides the threshold issues of enforceability of the arbitration agreement and the scope of issues to be arbitrated.  (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 891) When a motion to compel arbitration is brought by or against a nonsignatory, the Court must determine the threshold issue of whether the nonsignatory can be bound by, or receive the benefit of, the arbitration agreement. (Benaroya v. Willis (2018) 23 Cal.App.5th 462, 468) An arbitration agreement cannot bind nonsignatories “absent a judicial determination that the nonsignatory falls within the limited class of third-parties who can be compelled to arbitrate.” (Id.) There is no public policy in favor of compelling arbitration involving nonsignatories. (Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 220)

Issues Already Resolved

Plaintiff argues this Motion is a veiled motion for reconsideration of the Court’s December 11, 2018 Order granting Sterling’s motion to compel arbitration. In connection with that motion, “BMW NA state[d] that in the interest of judicial economy it consent[ed] to have Plaintiff’s claims against it arbitrated as well” but “Plaintiff [did] not consent to arbitration of its claims against BMW NA.” (12/11/18 Order.) The Court found “there [was] no legal basis provided for the Court to order the claims against BMW NA to arbitration,” noting that BMW’s consent was not an adequate because “[t]he Court cannot create contractual obligations between BMW NA and Plaintiff that do not exist, even if BMW NA now consents to arbitration.” The Court reiterated the general rule that the “right to compel arbitration does not exist for non-parties seeking to invoke another party’s right to compel arbitration.” At that time, “BMW NA d[id] not establish it is a third-party beneficiary of the Agreement”; further, there was no evidence of “any intent of Plaintiff or Sterling to benefit BMW NA.” As a consequence the Court declined to compel arbitration of claims against BMW, but stayed those claims pending arbitration of claims against Sterling. The Court granted the motion as to the claims against Sterling.

The stay was lifted on August 27, 2020, and BMW thereafter moved to compel arbitration. The exhibits provided by Plaintiff demonstrate that BMW did not offer any legal or factual argument previously in support of compelling arbitration. In Sterling’s original motion to compel arbitration, BMW merely claimed the Court “may” order that a “willing nonsignatory . . . be included in a binding arbitration of a dispute to which it is a party.” (Sogoyan Decl., Ex. 1 (Sterling Motion to Compel Arbitration); Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477-478.) Sterling’s Reply was crystal-clear that “[o]nly the Dealer, and not BMW NA, seeks to compel arbitration” and “BMW NA is not seeking to compel arbitration.” (Sogoyan Decl., Ex. 3.) At no point did Sterling or BMW argue that BMW is a third-party beneficiary, as BMW now argues. There is no discussion of equitable estoppel.

From the foregoing, it appears the Court previously decided only that (1) BMW’s consent to arbitration was insufficient in the face of Plaintiff’s objections to warrant joining BMW in the arbitration of Plaintiff’s claims against Sterling; and (2) BMW failed to establish any basis to compel arbitration of Plaintiff’s claims. The Court’s review of Sterling’s pleadings indicates BMW never sought to compel arbitration and never argued it was a third-party beneficiary—the Court merely observed there was no showing that was the case.[1] Rather, BMW clearly stated it was not attempting to compel arbitration and merely believed such arbitration would be warranted in the interests of judicial economy. The Court does not need to address issues of judicial economy in deciding this Motion; instead, the Court must determine whether BMW has standing to compel arbitration as a nonsignatory. That issue was not conclusively resolved in the December 11, 2018 Order. Therefore, this is not a veiled motion for reconsideration.

Despite the foregoing, it is unclear to the Court why BMW declined to move to compel arbitration at that time. There is no indication that BMW subsequently discovered new facts it could not have presented previously. Indeed, the Court notes BMW made an attempt to compel arbitration in July 2019 while the arbitration stay was still in place, but BMW’s motion was vacated due to the stay. (See BMW 3/9/20 Status Report.) However, BMW promptly moved to compel arbitration (again) once the stay was lifted and Plaintiff does not contend he was prejudiced by the first arbitration proceeding with Sterling[2] or that BMW has waived its right to compel arbitration. The Court therefore does not further consider this procedural history in resolving the Motion to Compel and addresses the merits. However, if the parties do not submit on the tentative, the Court requests input at the hearing on whether arbitration actually went forward with Sterling and how far the arbitration proceeded. It is unclear to the Court whether it would be equitable to compel Plaintiff to proceed through a second arbitration if Plaintiff already arbitrated once with Sterling; indeed, the additional expenses of a second arbitration would be to some degree attributable to BMW not moving to compel arbitration in 2018.[3]

Nonsignatory Enforcement—Equitable Estoppel

BMW, an undisputed nonsignatory to the Agreement, seeks to compel arbitration (1) as a third-party beneficiary of the Agreement and (2) under the doctrine of equitable estoppel. Normally, a nonsignatory may not compel arbitration or be compelled to arbitrate, but there are various exceptions to this rule. (See Boucher v. Alliance Title Co., Inc. (2005) 127 Cal.App.4th 262, 268 (identifying five theories under which a nonsignatory can enforce an arbitration clause)) As discussed below, the Court concludes BMW may compel arbitration under the doctrine of equitable estoppel. Therefore, the Court does not reach the third-party beneficiary argument.

Equitable Estoppel

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, supra, at 271; Goldman v. KPMG LLP (2009) 173 Cal.App.4th 209, 218-19.) “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.” (Id. at 272.) “‘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 her advantage, then attempt to avoid its application in defining the forum in which her dispute . . . should be resolved.’” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 496; Jensen v. U-Haul Co. (2017) 18 Cal.App.5th 295, 306.) “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.” (Id.)

Plaintiff argues equitable estoppel does not apply here because Plaintiff’s implied warranty claim “cannot reasonably be said to arise from the lease.” Plaintiff relies largely on Kramer v. Toyota Motor Corp. (9th Cir. 2011) 705 F.3d 1122 and Jurosky v. BMW of North America, LLC (2020) 441 F.Supp.3d 963. Both cases are distinguishable.

In Kramer, the Ninth Circuit rejected Toyota’s equitable estoppel argument because none of the claims in the class action were “intimately founded in and intertwined with” the underlying purchase agreements. (Id. at 1128) The asserted causes of action included violations of consumer protection law, unfair competition law, and false advertising law, none of which were based on purchase agreements but rather on Toyota’s conduct generally in California. The Court also declined to apply equitable estoppel based on a cause of action for breach of the implied warranty of merchantability, finding the purchase agreements “expressly differentiate[d] dealer warranties from manufacturer warranties.” (Id. at 1131) Specifically, one purchase agreement included a provision stating that “this provision does not affect any warranties covering the vehicle that a manufacturer or supplier may provide.” (Id.) Thus, the cause of action based on the manufacturer’s implied warranty was not based on the underlying agreement with the dealer. Finally, the Court found the breach of contract claim did not arise from the purchase agreements because it was actually based on the plaintiffs’ “status as third-party beneficiaries to contracts between Toyota and the Dealership.” (Id.)

In Jurosky,[4] the plaintiff asserted “five causes of action under the Song-Beverly Act, including: (1) failure to promptly replace the vehicle or make restitution; (2) failure to commence repairs within a reasonable time; (3) failure to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs; (4) breach of an express written warranty; and (5) breach of the implied warranty of merchantability,” as well as “one count of common law fraudulent concealment.” (Id. at 970.) The district court found these SBA claims were not “intertwined” with the underlying purchase agreement for two reasons. First, “none of [the claims] reference[d] the purchase agreement.” (Id.) Second, “in order to be intertwined with the purchase agreement, Plaintiff must allege a violation of a ‘duty, obligation, term or condition’ imposed by the purchase agreement.” (Id.; Goldman, supra, 173 Cal.App.4th at 230 (finding no “claim founded in or even tangentially related to any duty, obligation, term or condition imposed by the operating agreements.”)) No such violation was alleged in Jurosky.

Neither Jurosky nor Kramer is on point here. Rather, Felisilda controls. The operative difference between Felisilda and Kramer/Jurosky is “language that could be construed as extending the scope of arbitration to third parties” in the purchase/lease agreement. (Felisilda at 648.) In Kramer, that language did not exist.[5] (Id. at 648 (“The retail sales contracts in Kramer did not contain any language that could be construed as extending the scope of arbitration to third parties.”)) In Jurosky, that language existed, but was not considered. (Id. at 649 (“We decline to follow the Jurosky court's glossing over language in an arbitration clause that expressly includes third party nonsignatories.”))

The Court perceives no distinction between the arbitration language here and in Felisilda. In that case, the arbitration clause applied to “[a]ny 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  . . . 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.” (Id. at 643 (emphasis in original.) By comparison, the arbitration clause here provides that “[a]ny claim or dispute, whether in contract, tort, statute or otherwise . . . between me and you or your employees, agents, successors or assigns, which arise out of or relate to my credit application, lease, purchase or condition of this Vehicle, this Lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this Lease) shall, at your or my election, be resolved by neutral, binding arbitration and not by a court action.” (Barrett Decl., Ex. A (emphasis added).) The language is virtually identical.

Moreover, the claim asserted in Felisilda is highly similar to the claims asserted here. In Felisilda, the plaintiffs “assert[ed] a single cause of action for violation of the Song-Beverly Act,” alleging that they had “purchased a used 2011 Dodge Caravan . . . and express warranties accompanied the sale of the vehicle to [them] by which FCA . . . undertook to preserve or maintain the utility or performance of [their] vehicle or provide compensation if there was a failure in such utility or performance.” The plaintiffs alleged delivery of the vehicle “with serious defects and nonconformities to warranty” and alleged “develop[ment of] other serious defects and conformities to warranty including, but not limited to, engine, interior, and electrical defects.” Plaintiffs alleged that FCA “failed to either promptly replace the new motor vehicle or promptly make restitution” under the Song-Beverly Act.

Here, Plaintiff asserts five causes of action for violation of the Song-Beverly Act, alleging that he “leased a 2012 BMW 550 . . . which was manufactured and or distributed by Defendant,” and that he “received an express written warranty in which Defendant undertook to preserve or maintain the utility or performance of the Vehicle or to provide compensation if there is a failure in utility or performance for a specified period of time.” (FAC, para. 28-29.) Plaintiff alleges that, during the warranty period, the vehicle “contained and/or developed defects.” (FAC, para. 30.) Plaintiff alleges BMW “and its representatives in this state have been unable to service or repair the vehicle to conform to the applicable express warranties” and further “failed to promptly replace the Vehicle or make restitution” under the Song-Beverly Act. (FAC, para. 31.) These allegations in support of the first Song-Beverly cause of action mirror those in Felisilda.

The Felisilda court concluded that the plaintiffs’ Song-Beverly claim against the manufacturer “directly relate[d] to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Id. at 497.) Under the language of the arbitration clause, the plaintiffs “expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract.” (Id.) Therefore, the court concluded the plaintiffs were “estopped from refusing to arbitrate their claim against” the manufacturer. (Id.) Similarly here, Plaintiff’s Song-Beverly claims relate to defects in the vehicle and BMW’s inability “to serve or repair the vehicle to conform to the applicable express warranties.” (FAC, para. 31.) These warranties were received in connection with the lease agreement. (FAC, para. 29.) Thus, under identical arbitration clause language, Plaintiff similarly “agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories” such as BMW. Felisilda controls and is factually on point.

Kramer, by contrast, is distinguishable both insofar as (1) the arbitration language relied upon did not address third parties (see supra, 705 F.3d at 1124-25) and (2) the plaintiffs did not assert Song-Beverly claims based on express warranties issued in connection with an underlying purchase agreement. (Id. at 1131 (arbitration agreement “expressly differentiate[d] dealer warranties from manufacturer warranties.”)) Here, like in Felisilda and unlike in Kramer, the Song-Beverly claims allege that BMW “violated [express] warranties . . . received as a consequence of the [lease] contract.” The Court has already distinguished Jurosky above.

The Court is unpersuaded by Plaintiff’s argument that the implied warranty claim is not intertwined with the lease agreement. The implied warranty of merchantability clearly relates to the “condition of the vehicle”—as Plaintiff notes, one element of that claim is that the vehicle “was not of the same quality as vehicles generally acceptable in the trade.” (Opposition, p. 9; see CACI 3210.) The implied warranty claim therefore is a claim which “arises out of or relates to . . . [the] condition of this Vehicle.” (Barrett Decl., Ex. A.) As in Felisilda, Plaintiff “expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract” – under identical arbitration clause language. The implied warranty claim is intertwined with the underlying agreement and subject to arbitration.

For the foregoing reasons, the Court finds Plaintiff’s claims against BMW arise from the lease agreement and Plaintiff is “estopped from refusing to arbitrate” the Song-Beverly claims.

CONCLUSION

Defendant BMW NA’s Motion to Compel Arbitration is GRANTED.

All matters in this case are now stayed pending arbitration.

BMW to give notice.