Opinion
CV 20-2331 DSF (RAOx)
2020-09-08
Robert Isadore MANUWAL, Plaintiff, v. BMW OF NORTH AMERICA, LLC, et al., Defendants.
Michael H. Rosenstein, Sepehr Daghighian, California Consumer Attorneys PC, Los Angeles, CA, for Plaintiff. Brian Ming Hom, Lisa R. Weddle, Morgan Lewis and Bockius LLP, Los Angeles, CA, Molly Moriarty Lane, Garrick Y. Chan, Morgan Lewis and Bockius LLP, San Francisco, CA, for Defendants.
Michael H. Rosenstein, Sepehr Daghighian, California Consumer Attorneys PC, Los Angeles, CA, for Plaintiff.
Brian Ming Hom, Lisa R. Weddle, Morgan Lewis and Bockius LLP, Los Angeles, CA, Molly Moriarty Lane, Garrick Y. Chan, Morgan Lewis and Bockius LLP, San Francisco, CA, for Defendants.
Order DENYING Defendant's Motion to Compel Arbitration and Stay All Proceedings (Dkt. 23)
Dale S. Fischer, United States District Judge
Defendant BMW of North America, LLC, moves to compel arbitration of claims brought by Plaintiff Robert Isadore Manuwal and to stay these proceedings pending completion of the arbitration. Dkt. 23 (Mot.). Plaintiff opposes. Dkt. 26 (Opp'n). The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78 ; Local Rule 7-15. For the reasons stated below, the motion is DENIED.
I. Background
On May 31, 2019, Plaintiff purchased a motorcycle from nonparty BMW Motorcycles of Ventura County. Dkt. 1-2 (Compl.) ¶ 8; Dkt. 23-1, Ex. A (Sale Contract). Plaintiff and BMW Motorcycles executed the Sale Contract, which defined Plaintiff as "[y]ou, the Buyer," and BMW Motorcycles as "the Seller-Creditor (sometimes ‘we’ or ‘us’ in this contract)." Sale Contract at 1. The Sale Contract contained an arbitration provision, which states in pertinent part:
The Court may examine evidence outside the pleadings on a motion to compel arbitration. See Regents of Univ. of Cal. v. Japan Sci. & Tech. Agency, No. CV 14-04419 MMM (CWx), 2014 WL 12690187, at *3 n.24 (C.D. Cal. Oct. 16, 2014) (collecting cases).
1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.
...
Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or
relates to your credit application, purchase or condition of this vehicle, this contract or any resulting 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 2.
Plaintiff alleges the motorcycle had a defect with its Bluetooth audio system. Compl. ¶ 9. Defendant, which provided express and implied warranties accompanying the sale of the motorcycle, was unable to repair the motorcycle in a timely manner and did not replace the motorcycle or make restitution. Id. ¶¶ 8, 24–25, 32.
Plaintiff filed an action against Defendant in the Los Angeles County Superior Court for various violations of the Song-Beverly Consumer Warranty Act. Compl. ¶¶ 16–70. Defendant answered in state court and subsequently removed the action to federal court. Dkt. 1; Dkt. 1-3.
II. Legal Standard
"[T]he Federal Arbitration Act (FAA) makes agreements to arbitrate ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ " AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 336, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (quoting 9 U.S.C. § 2 ). "By its terms, the [FAA] leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) ; see also Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004) (If a valid arbitration agreement exists, "the court must order the parties to proceed to arbitration ... in accordance with the terms of their agreement"). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928, 938 (9th Cir. 2013) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ).
Generally, a court's role under the FAA is limited to determining "two ‘gateway’ issues: (1) whether there is an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute." Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015) (quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ). But even these gateway issues can be submitted to an arbitrator where there is clear and unmistakable evidence that the parties intended that result. See id. (citing AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ). "When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract." Henry Schein, Inc. v. Archer & White Sales, Inc., ––– U.S. ––––, 139 S. Ct. 524, 528, 202 L.Ed.2d 480 (2019).
III. Discussion
Defendant moves to compel arbitration based on the Sale Contract's arbitration provision. Plaintiff does not contest the existence and validity of an arbitration agreement between him and BMW Motorcycles. Instead, the parties dispute whether Defendant can enforce the provision given that Defendant is not a signatory to the Sale Contract. Defendant asserts that the arbitrator should decide that question. The Court resolves the second issue first.
Plaintiff instead highlights the lack of a mandatory arbitration provision in Defendant's express warranty. Opp'n at 3–4. The terms of that warranty are irrelevant to this motion. See, e.g., Tseng v. BMW of N. Am., LLC, No. 2:20-cv-00256-VAP-AFMx, 2020 WL 4032305, at *3 (C.D. Cal. Apr. 15, 2020) (questioning relevance of express warranty's arbitration provision to motion predicated on purchase agreement's arbitration provision).
A. The Court May Decide the Question of Arbitrability
Defendant argues that the arbitration provision delegates questions of arbitrability, including whether Defendant may invoke the Sale Contract's arbitration provision, to the arbitrator. Mot. at 8–10. The Court disagrees. Plaintiff and BMW Motorcycles agreed to arbitrate arbitrability as to disputes "between you [Plaintiff] and us [BMW Motorcycles] or our employees, agents, successors or assigns"—and no other nonsignatory. Sale Contract at 2. Defendant, the manufacturer of Plaintiff's motorcycle, does not argue that it is an employee, agent, successor, or assign of BMW Motorcycles. "Given the absence of clear and unmistakable evidence that Plaintiff[ ] agreed to arbitrate arbitrability with nonsignatories" such as Defendant, this Court may decide whether the dispute is arbitrable. Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1127 (9th Cir. 2013).
The Court declines Defendant's invitation to follow Arab v. BMW of North America, LLC, No. SA CV 19-1303-DOC (JDEx), 2019 WL 8011713 (C.D. Cal. Sept. 10, 2019). Mot. at 9–10. Examining a similar arbitration provision extending between "you [the plaintiff] and us [the dealership] or our employees, agents, successors or assigns," that court referred the arbitrability question to an arbitrator, reasoning that the provision "specifically contemplates disputes arising between plaintiff and third parties." Id. at *3 (emphasis removed). But the provision here contemplates arbitrating arbitrability as to claims against only a limited number of third parties: the "employees, agents, successors, or assigns" of BMW Motorcycles. Sale Contract at 2. The Arab court did not consider whether the provision clearly and unmistakably demonstrated the plaintiff's intent to arbitrate arbitrability as to disputes against the particular third party seeking to enforce the provision, the manufacturer. See Arab, 2019 WL 8011713, at *3 ; see also Schulz v. BMW of N. Am., LLC, No. 5:20-cv-01697-NC, 472 F.Supp.3d 632, 637–39 (N.D. Cal. July 15, 2020) (declining to follow Arab and determining based on a similar provision that the buyer "agreed to arbitrate arbitrability only in disputes with the dealership—not with [the manufacturer]"); cf. Kramer, 705 F.3d at 1127 n.3 (noting that the arbitration provision at issue extended to the dealership's assignees, employees, and agents, and commenting that the defendant manufacturer did not contend it was any of those).
B. Defendant Cannot Enforce the Arbitration Provision
"[A] litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement." Kramer, 705 F.3d at 1128 (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) ); see also Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1045 (9th Cir. 2009) ("General contract and agency principles apply in determining the enforcement of an arbitration agreement by or against nonsignatories.").
Defendant argues that it may enforce the arbitration provision either under the doctrine of equitable estoppel or as a third-party beneficiary of the Sale Contract. Mot. at 10–17. Neither theory has merit.
1. Equitable Estoppel
"Equitable estoppel precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes." Kramer, 705 F.3d at 1128 (quoting Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006) ). In Kramer, the Ninth Circuit articulated the standard for determining whether a nonsignatory may compel arbitration under California law:
[T]he doctrine of equitable estoppel applies in two circumstances: (1) when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are intimately founded in and intertwined with the underlying contract, and (2) when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and the allegations of interdependent misconduct are founded in or intimately connected with the obligations of the underlying agreement.
Id. at 1128–29 (citations, alteration, and quotation marks omitted).
Defendant contends Plaintiff's claims are intimately founded in and intertwined with the Sale Contract because the manufacturer's express and implied warranties are additional terms of the Sale Contract. Mot. at 11–14. It is undisputed that Defendant's warranties arise from the sale transaction. See Compl. ¶¶ 8, 32 (alleging express and implied warranties "accompanied the sale" of the motorcycle); Dkt. 26-3, at 2 (outlining Defendant's express warranty, wherein "[c]overage begins on the date of first retail sale"); Cal. Civ. Code § 1792 ("[E]very sale of consumer goods ... shall be accompanied by the manufacturer's ... implied warranty that the goods are merchantable." (emphasis added)). But Defendant fails to show that the warranties are terms of the contract between Plaintiff and the dealership. The Sale Contract specifically differentiates manufacturer warranties from seller warranties and excludes manufacturer warranties from the Sale Contract's terms. See Sale Contract at 2, § 4 (stating that the Sale Contract's warranty provision "does not affect any warranties covering the vehicle that the vehicle manufacturer may provide"). The Sale Contract also contains a provision confirming that the written contract "contains the entire agreement between you [Plaintiff] and us [BMW Motorcycles] relating to this contract." Id. at 1. Defendant's invocation of general principles of contract law concerning warranties, Mot. at 11–14, does not defeat the contracting parties’ express intent to disentangle the Sale Contract from any manufacturer warranties. The Court declines to conclude that the warranties at issue here are part of the Sale Contract or "intimately founded in and intertwined with" it. See Kramer, 705 F.3d at 1131 (determining that manufacturer's implied warranty of merchantability arose independently from vehicle purchase agreement); Schulz, 472 F.Supp.3d at 639–40 (relying on Kramer to reject argument that manufacturer's warranties are terms of vehicle purchase agreement). Defendant fails to show that equitable estoppel applies.
2. Third-Party Beneficiary
A nonsignatory may enforce an arbitration agreement if the nonsignatory is a third-party beneficiary of the agreement. Jenks v. DLA Piper Rudnick Gray Cary US LLP, 243 Cal. App. 4th 1, 8, 196 Cal.Rptr.3d 237 (2015) ; see also Cal. Civ. Code § 1559 ("A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it."). To claim the benefits of such an agreement, "the third party must show that the contract reflects the express or implied intention of the parties to the contract to benefit the third party." Comer, 436 F.3d at 1102 (quoting Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1211 (9th Cir. 2000) ); see also Gilbert Fin. Corp. v. Steelform Contracting Co., 82 Cal. App. 3d 65, 69–70, 145 Cal.Rptr. 448 (1978) (explaining that the third party must be "more than incidentally benefitted by the contract").
Defendant argues that the contracting parties intended Defendant to benefit from the contract. Mot. at 15–17. Neither section of the Sale Contract cited by Defendant shows the parties’ intent to benefit Defendant. First, Defendant argues that the contracting parties anticipated that Defendant would warrant the motorcycle's condition. Id. at 16. The provision on which Defendant relies states that the Sale Contract "does not affect any warranties covering the vehicle that the vehicle manufacturer may provide." Sale Contract at 2, § 4 (emphasis added). This clause does not indicate one way or the other whether the contracting parties anticipated manufacturer warranties, let alone warranties pertaining to the vehicle's condition.
Defendant further argues that it benefits directly from the arbitration provision because Plaintiff's claims concern the condition of the motorcycle, which is a subject expressly contemplated in the arbitration provision as an arbitrable claim or dispute. Mot. at 16–17 (citing Sale Contract at 2). Although the provision contemplates that subject matter, the provision is expressly limited to disputes "between you [Plaintiff] and us [BMW Motorcycles] or our employees, agents, successors or assigns." Sale Contract at 2. The contracting parties did not express an intent to arbitrate claims between Plaintiff and other nonsignatories concerning the condition of the vehicle. "[I]f it had been the intent of the parties—or at the option of the dealership—to have [the manufacturer] included under the arbitration language, this could have been expressly referenced in the ‘you and us’ clause or the ‘third parties’ clause of the [arbitration provision]." Jurosky v. BMW of N. Am., LLC, 441 F. Supp. 3d 963, 975 (S.D. Cal. 2020) ; cf. Tseng v. BMW of N. Am., LLC, No. 2:20-cv-00256-VAP-AFMx, 2020 WL 4032305, at *3–4 (C.D. Cal. Apr. 15, 2020) (concluding manufacturer was third-party beneficiary of agreement covering disputes between buyer and dealership's assignee's "affiliates," which included manufacturer). Defendant fails to show it is a third-party beneficiary of the Sale Contract.
IV. Conclusion
Defendant cannot enforce the arbitration agreement between Plaintiff and BMW Motorcycles. Because this is fatal to the motion, the Court does not reach the parties’ other arguments. The motion is DENIED.
IT IS SO ORDERED.