Kermani v. Hyundai Motor America CA2/4 ( 2023 )

Filed 10/19/23 Kermani v. Hyundai Motor America CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
SIAMAK KERMANI, B316652
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. 21STCV24017)
v.
HYUNDAI MOTOR AMERICA,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Maren Nelson, Judge. Affirmed.
Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Brittany B. Sutton,
Eric Y. Kizirian, Karyn L. Ihara and Michael K. Grimaldi for Defendant and
Appellant.
Wirtz Law, Richard M. Wirtz, Ommar Chavez; O’Connor Law Group,
Mark O’Connor; Niddrie Addams Fuller Singh and Rupa G. Singh for
Plaintiff and Respondent.
INTRODUCTION
Siamek Kermani (Kermani), an electric car owner, filed a putative class
action complaint against his car’s manufacturer, Hyundai Motor America
(Hyundai). Kermani’s claims relate to alleged battery defects in vehicles
Hyundai manufactured. Hyundai is the sole named defendant in Kermani’s
lawsuit. Kermani did not name the selling dealer, Keyes Hyundai (Dealer),
as a codefendant.
Hyundai moved to compel Kermani’s claims to arbitration. Hyundai
sought to enforce an arbitration provision contained in the sale contract that
Kermani and the selling dealer signed when Kermani bought the car.
Hyundai was not a party to the sale contract, nor did Hyundai sign the sale
contract. The trial court denied the motion.
Hyundai appeals the trial court’s order denying its motion. Hyundai
asserts the trial court erred by (1) finding Hyundai did not satisfy its
statutory burden to allege the existence of an agreement to arbitrate;
(2) deciding the threshold issue of the arbitration provision’s enforceability
instead of compelling the issue to an arbitrator to decide; and (3) finding
Hyundai, a nonsignatory, did not have standing to enforce the arbitration
agreement under either the equitable estoppel doctrine or as a third-party
beneficiary to the sale contract. We disagree with Hyundai’s contentions and
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Sale Contract and the Arbitration Provision
Kermani purchased his car from the Dealer. He financed his purchase
through the Dealer and signed an agreement entitled, “Retail Installment
Sale Contract—Simple Finance Charge (With Arbitration Provision)” (Sale
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Contract). Kermani and the Dealer are the only signatories to the Sale
Contract.
The Sale Contract identified Kermani as “Buyer” and “you,” and
identified the Dealer as “Seller-Creditor,” “we,” and “us.”
The Sale Contract memorialized Kermani’s payment obligations to the
Dealer and outlined the Dealer’s remedies against Kermani should he fail to
timely pay.
The Sale Contract contained an arbitration provision. The provision
stated, in boldface: “EITHER YOU OR WE MAY CHOOSE TO HAVE ANY
DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN
COURT OR BY JURY TRIAL.” (Italics added.)
The arbitration provision continued: “Any claim or dispute . . .
(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.” (Italics
added.)
The Sale Contract specified, “[a]ny arbitration under this Arbitration
Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et.
seq.) and not by any state law concerning arbitration.” The Sale Contract
provided “[f]ederal law and California law apply to this contract.”
The Sale Contract stated, in part: “WARRANTIES SELLER
DISCLAIMS [¶] If you do not get a written warranty, and the Seller does
not enter into a service contract within 90 days from the date of this contract,
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the Seller makes no warranties, express or implied, on the vehicle, and there
will be no implied warranties of merchantability or of fitness for a particular
purpose. [¶] This provision does not affect any warranties covering the
vehicle that the vehicle manufacturer may provide.”
Hyundai was not a party to the Sale Contract. The Sale Contract also
does not refer to Hyundai other than to the make of the car as a “Hyundai
Kona” and to the name of the Dealer, “Keyes Hyundai.”1 (Italics added.)
B. The Complaint
Kermani filed a putative class action against Hyundai, not the Dealer.
His complaint alleged four causes of action for: (1) breach of express warranty
under the Song-Beverly Act (Civ. Code, § 1790, et seq.); (2) breach of implied
warranty under the Song-Beverly Act; (3) violation of the Unfair Competition
Law (Bus. & Prof. Code, § 17200); and (4) breach of the covenant of good faith
and fair dealing.
The complaint attached the “2019 Owner’s Handbook & Warranty
Information” (the Express Warranty). The Express Warranty identified
Hyundai as the “Warrantor.”
All of Kermani’s causes of action incorporate the following allegations:
Before Kermani purchased his car, Hyundai “knew of the battery system
defect through internal sources, testing, and consumer complaints.” Kermani
alleged “[d]espite this knowledge, [Hyundai] failed to disclose and actively
concealed the battery system defect from [Kermani] and potential Class
Members. . . . Instead, [Hyundai] continued to market to potential Class
Members to purchase the Class Vehicles without informing potential Class
1 Hyundai concedes Keyes Hyundai is a separate corporate entity from
Hyundai.
4
Members of the underlying, and extremely dangerous, manufacturing defect
present in the Class Vehicles’ battery systems.” Kermani alleged the defects
caused him and potential Class Members harm and they “suffered actual
damages.”
C. The Motion to Compel Arbitration Proceedings
Hyundai filed a motion to compel arbitration pursuant to the
arbitration provision in the Sale Contract. Hyundai argued, as a threshold
matter, the arbitration provision contained a delegation clause requiring an
arbitrator, not the court, to decide arbitrability disputes. Hyundai also
asserted it had standing to enforce the arbitration agreement as a
nonsignatory because: (1) the plain language of the contract mentioned third
parties; (2) Hyundai was a third-party beneficiary of the Sale Contract; and
(3) the equitable estoppel doctrine barred Kermani from arguing that non-
signatories could not enforce the arbitration provision.
In his opposition, Kermani argued the court should deny the motion
because Hyundai failed to meet its statutory burden to prove the existence of
an arbitration agreement. Kermani argued Hyundai failed to properly
authenticate the purported Sale Contract because the contract was attached
to its attorney’s declaration and the attorney lacked the personal knowledge
to authenticate it. Kermani also filed evidentiary objections to the
declaration based on hearsay and lack of foundation.
Kermani next opposed Hyundai’s motion, arguing: (1) the court, not an
arbitrator, had authority to determine arbitrability disputes; and (2) Hyundai
lacked standing to enforce the arbitration provision as a nonsignatory.
In reply, Hyundai argued applicable law did not require a moving
party to authenticate an arbitration agreement to meet its initial statutory
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burden. Hyundai noted “if there are lingering authenticity concerns,
[Hyundai] can and will obtain a declaration from the dealership further
authenticating the [Sale Contract] should the Court require it.”
After a hearing on the motion to compel arbitration, the trial court
issued its order denying the motion. The court agreed with Kermani that
Hyundai failed to properly authenticate the arbitration agreement and
sustained Kermani’s evidentiary objections. The court concluded the motion
could be denied on that basis alone.
The court nevertheless reached the merits of the motion. On the
threshold issue of the delegation clause, the court concluded it had
jurisdiction to decide arbitrability regarding whether Hyundai had standing
to enforce the arbitration provision. The court concluded Hyundai, as a
nonsignatory, lacked standing to enforce the provision.
Hyundai timely appealed.
DISCUSSION
A. Standard of Review and Governing Law
The issues on appeal present pure questions of law and are therefore
subject to de novo review. (Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th
1497, 1505; Pinnacle Museum Tower Assn. v. Pinnacle Market Development
(US), LLC (2012) 55 Cal.4th 223, 236 [“[w]here . . . the evidence is not in
conflict, we review the trial court’s denial of arbitration de novo”].)
B. Existence of An Agreement to Arbitrate
Hyundai contends the trial court erred when it found Hyundai did not
meet its statutory burden to prove the existence of an arbitration agreement.
We disagree.
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1. Governing Principles
The parties generally agree that the Federal Arbitration Act (FAA; 9
U.S.C. § 1 et seq.) governs arbitration under the Sale Contract. However,
Kermani contends the California Arbitration Act’s (CAA) (Code Civ. Proc.,
§ 1280 et seq.) procedural rules apply in state court proceedings to determine
the existence or validity of an arbitration agreement. Kermani is correct.
(Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 410
(Rosenthal); Banner Entertainment, Inc. v. Superior Court (1998) 62
Cal.App.4th 348, 356–357.)
Code of Civil Procedure section 1281.2 authorizes petitions to compel
arbitration, providing in part: “On petition of a party to an arbitration
agreement alleging the existence of a written agreement to arbitrate a
controversy and that a party to the agreement refuses to arbitrate that
controversy, the court shall order the petitioner and the respondent to
arbitrate the controversy if it determines that an agreement to arbitrate the
controversy exists.” (§ 1281.2.)
In Rosenthal, supra, 14 Cal.4th at page 413, our Supreme Court
explained the moving party’s initial evidentiary burden in alleging the
existence of an agreement to arbitrate. “[W]hen a petition to compel
arbitration is filed and accompanied by prima facie evidence of a written
agreement to arbitrate the controversy, the court itself must determine
whether the agreement exists and, if any defense to its enforcement is raised,
whether it is enforceable. Because the existence of the agreement is a
statutory prerequisite to granting the petition, the petitioner bears the
burden of proving its existence by a preponderance of the evidence.” (Id.,
italics added.) Our Supreme Court reiterated this evidentiary burden in
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Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972
(Engalla).
Before a writing may be considered evidence, it must be authenticated.
(Evid. Code, § 1401, subd. (a); Continental Baking Co. v. Katz (1968) 68
Cal.2d 512, 525–526.) To authenticate a writing, the proponent of the
document must introduce “evidence sufficient to sustain a finding that it is
the writing that the proponent of the evidence claims it is” or establish “such
facts by any other means provided by law.” (Evid. Code, § 1400.) A
declaration based on information and belief does not constitute admissible
evidence. (See Star Motor Imports, Inc. v. Superior Court (1979) 88
Cal.App.3d 201, 204 [“An affidavit based on ‘information and belief’ is
hearsay and must be disregarded [citations]. . . . Such allegations on
‘information and belief’ furnish ‘“no proof of the facts stated’”].)
2. Evidentiary Burden
Here, Hyundai’s outside counsel attached the Sale Contract to her
declaration in support of Hyundai’s motion. The attorney declared that she
had “personal knowledge of the following facts, except for those based on
information and belief.” (Italics added.) In her declaration, she attached
what she purported to be a “true and correct copy” of the Sale Contract. She
did not provide any information to establish she had personal knowledge to
authenticate the Sale Contract. Because Hyundai did not authenticate the
Sale Contract, it failed to meet the evidentiary burden necessary to satisfy
the statutory requisite of proving the existence of an agreement to arbitrate.
(See Rosenthal, supra, 14 Cal.4th at p. 413; Engalla, supra, 15 Cal.4th at p.
972.)
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Hyundai relies on Condee v. Longwood Management Corp. (2001) 88
Cal.App.4th 215 (Condee) to argue a moving party need not comply with the
evidentiary rules of authentication to meet its initial statutory burden. As
the trial court noted, two appellate opinions have called Condee into doubt,
stating “[t]o the extent Condee conflicts with Rosenthal, our Supreme Court’s
decision is controlling.” (Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219,
fn. 8; Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846
[same].) Rosenthal and Engalla held the moving party must prove the
existence of an arbitration agreement by a preponderance of the evidence. As
discussed, Hyundai failed to provide any admissible evidence to prove the
existence of the agreement to arbitrate.
While the trial court’s order may be affirmed on this basis alone, we
nevertheless proceed to address the remaining issues raised in Hyundai’s
appeal.
C. The Delegation Clause
Hyundai contends the trial court lacked jurisdiction to consider
whether Hyundai had standing, as a nonsignatory, to enforce the Sale
Contract’s arbitration provision. Hyundai asserts the Sale Contract’s
inclusion of a delegation clause required an arbitrator, not the court, to
decide any disputes regarding the arbitrability of Kermani’s claims. (See
Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 774 [contract
clauses that delegate questions of arbitrability to an arbitrator are routinely
referred to as “delegation clauses”].) We disagree with Hyundai’s contention
and conclude the court had jurisdiction to decide the question of Hyundai’s
standing to enforce the arbitration provision.
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“‘It is well settled in both commercial and labor cases that whether
parties have agreed to “submi[t] a particular dispute to arbitration” is
typically an “issue for judicial determination.”’” (Kramer v. Toyota Motor
Corp. (9th Cir. 2013) 705 F.3d 1122, 1127 (Kramer).) “Courts should not
assume that the parties agreed to arbitrate arbitrability unless there is
‘clea[r] and unmistakabl[e]’ evidence that they did so.” (First Options of
Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.) “Just as the arbitrability
of the merits of a dispute depends upon whether the parties agreed to
arbitrate that dispute [citations] . . . the question ‘who has the primary power
to decide arbitrability’ turns upon what the parties agreed about that matter.”
(Id. at p. 943.)
Courts have concluded the trial court, not an arbitrator, has
jurisdiction to decide arbitrability disputes where a nonsignatory car
manufacturer moved to compel a signatory car purchaser’s claims to
arbitration. (Kramer, supra, 705 F.3d at p. 1127; Safley v. BMW of North
America, LLC (S.D. Cal. Feb. 5, 2021, No. 20-cv-00366-BAS-MDD) 2021 WL
409722, at *3 (Safley).) Those cases involved nearly identical delegation
clauses as those involved here. (Ibid.)
In Kramer, 705 F.3d 1122, the court concluded the delegation clause
lacked “clear and unmistakable evidence that Plaintiffs agreed to arbitrate
arbitrability with nonsignatories.” (Id. at p. 1127.) The court reasoned,
“[t]he parties to this litigation did not agree to arbitrate arbitrability;
Plaintiffs only agreed to arbitrate arbitrability—or any other dispute—with
the Dealerships because the arbitration clause is limited to claims between
‘you and us’—i.e. Plaintiffs and the Dealerships. In the absence of a
disagreement between Plaintiffs and the Dealerships, the agreement to
arbitrate arbitrability does not apply. Therefore, a disagreement between
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Plaintiffs and [car manufacturer] ‘is simply not within the scope of the
arbitration agreement.’” (Id. at p. 1128; see also Safley, supra, 2021 WL
409722 at *4 [concluding based on the same delegation clause that the court,
not an arbitrator, had jurisdiction to decide arbitrability disputes between
signatory car buyer and nonsignatory manufacturer].)
Here, the Sale Contract contained an identical delegation clause as that
in Kramer and Safley. The clause’s plain language confirms that Kermani
agreed to delegate arbitrability disputes between Kermani and the Dealer,
not disputes between Kermani and Hyundai. The clause specified it covered
arbitrability disputes “between you [Kermani] and us [Dealer].” (Italics
added.)
Hyundai contends the “plain words” of the delegation clause
demonstrated clear and unmistakable evidence “that the delegation clause
applies to third parties.” We disagree. The clause provided: “Any claim or
dispute . . . between you and us . . . which arises out of or relates to . . . 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” arbitration. (Italics added.)
The reference to “third parties who do not sign this contract” explains
the types of claims that can be compelled to arbitration. That language does
not indicate Kermani’s agreement that an arbitrator would decide
arbitrability disputes with Hyundai. The plain language specified an
arbitrator should decide arbitrability disputes only between Kermani and the
Dealer.
Hyundai also relies on the United States Supreme Court’s decision in
Henry Schein, Inc. v. Archer and White Sales, Inc. (2019) 139 S.Ct. 524(Henry Schein) to support its contention that the delegation clause required
11
an arbitrator, not the court, to decide arbitrability questions. Hyundai
asserts the Henry Shein court held, “courts do not have the power to
adjudicate arbitrability in cases involving contracts with delegation clauses.”
Henry Schein, however, did not create a new, general rule. The court
reiterated the above-mentioned rule, “[C]ourts ‘should not assume that the
parties agreed to arbitrate arbitrability unless there is clear and
unmistakable evidence that they did so.’” (Henry Schein, supra, 139 S.Ct. at
p. 531.)
Hyundai attempts to undermine the persuasiveness of Kramer by
noting, “Kramer was decided before Henry Schein.” We find no merit to
Hyundai’s assertion because Henry Schein recognized the appropriate rule is
the one Kramer applied. We also note the Henry Schein court did not decide
the issue of whether the parties had agreed to delegate arbitrability
questions to an arbitrator. The court stated it “express[ed] no view about
whether the contract at issue in this case in fact delegated the arbitrability
question to an arbitrator” and remanded the issue for the appellate court to
consider. (Henry Schein, supra, 139 S.Ct. at p. 531.)
We conclude the court had jurisdiction to determine whether Hyundai,
as a nonsignatory, had standing to enforce the arbitration provision.
D. Standing to Enforce the Arbitration Provision
As discussed below, we agree with the trial court’s ruling that, based on
the plain language of the contract, Hyundai does not have standing to enforce
the contract’s arbitration provision. We also conclude Hyundai may not
12
enforce the arbitration clause under theories of equitable estoppel or third-
party beneficiary.2
1. Governing Principles
“Under certain circumstances, a nonsignatory to an arbitration
agreement may seek to enforce [the agreement] against a signatory. Whether
such enforcement is permissible is a question of state law.” (Ford Motor
Warranty Cases (2023) 89 Cal.App.5th 1324, 1332 (Ford Warranty), review
granted July 19, 2023, No. S279969; see also Kramer, supra, 705 F.3d at p.
1128; Thomas v. Westlake (2012) 204 Cal.App.4th 605, 614, fn. 7.) A
nonsignatory bears the burden of establishing that it should be treated as a
party to the arbitration agreement. (Jones v. Jacobson (2011) 195
Cal.App.4th 1, 15.)
“‘Although the FAA preempts any state law that stands as an obstacle
to its objective of enforcing arbitration agreements according to their terms,
. . . we apply general California contract law to determine whether the
parties formed a valid agreement to arbitrate their dispute.’ [Citations.]”
(Ford Warranty, supra, 89 Cal.App.5th at p. 1332.) “‘General contract law
principles include that “[t]he basic goal of contract interpretation is to give
effect to the parties’ mutual intent at the time of contracting. [Citations.] . . .
‘The words of a contract are to be understood in their ordinary and popular
sense.”’ [Citation.] Furthermore, ‘“[t]he whole of a contract is to be taken
together, so as to give effect to every part, if reasonably practicable, each
clause helping to interpret the other.’”’ (Franco v. Greystone Ridge
Condominium (2019) 39 Cal.App.5th 221, 227.)” (Ibid.)
2 Because we reach this conclusion, we need not address Kermani’s
independent arguments for affirming the trial court’s order.
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2. The Arbitration Provision’s Plain Language
Hyundai urges the plain language of the arbitration provision permits
it to enforce the provision against Kermani.
Hyundai emphasizes the following italicized language from the
arbitration provision to support its argument: “Any claim or dispute . . .
between you and us or our employees, agents, successors or assigns, which
arises out of or relates to [Kermani’s] 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.” (Italics added.)3
Hyundai contends the reference to “third parties” means Hyundai, as a
“third party” can enforce the provision. Hyundai relies on the court’s
interpretation of the “third party” language in the identical arbitration
provision at issue in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, 498
(Felisilda). In that case, the arbitration provision also appeared in a dealer’s
sale contract with car purchasers. The court construed the same italicized
language referenced above as providing a basis to compel plaintiffs’ claims
against the car manufacturer to arbitration.
In Ford Warranty, our colleagues in Division Eight disagreed with
Felisilda’s interpretation of the same “third party” language contained in the
same arbitration provision. The language is identical to the arbitration
provision here. It also involved a nonsignatory car manufacturer’s attempt to
compel the signatory purchasers’ claims to arbitration. (Id. at pp. 1332–
3 As discussed, we conclude Hyundai failed to properly authenticate the
Sale Contract. However, for purposes of analyzing the issues on appeal, we
cite the provisions of the Sale Contract Hyundai filed with its motion.
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1333.) The Ford Warranty court construed the reference to “third parties,”
not “as consent by the purchaser to arbitrate claims with third party
nonsignatories. Rather, . . . as a further delineation of the subject matter of
claims the purchasers and dealers agreed to arbitrate. They agreed to
arbitrate disputes ‘between’ themselves—‘“you and us”’—arising out of or
relating to ‘“relationship[s],’ including ‘relationship[s] with third parties who
[did] not sign th[e] [sale] contract[s],”’ resulting from the ‘“purchase, or
condition of th[e] vehicle, [or] th[e] [sale] contract.”’” (Id. at pp. 1334–1335.)
The Ford Warranty court recognized that car purchasers, such as
Kermani, “can elect to buy insurance, theft protection, extended warranties
and the like from third parties, and they can finance their transactions with
those third parties under the sale contracts. The ‘third party’ language in the
arbitration clause means that if a purchaser asserts a claim against the
dealer (or its employees, agents, successors or assigns) that relates to one of
these third party transactions, the dealer can elect to arbitrate that claim. It
says nothing of binding the purchaser to arbitrate with the universe of
unnamed third parties.” (Ford Warranty, supra, 89 Cal.App.5th at p. 1335.)
After briefing was completed in Hyundai’s appeal, three appellate panels
published opinions agreeing with Ford Warranty’s interpretation of the “third
party” language and rejecting Felisilda’s. (See Montemayor v. Ford Motor Co.
(2023) 92 Cal.App.5th 958, 968–974 (Montemayor); Kielar v. Superior Court
(Aug. 16, 2023, C096773) __ Cal.App.5th __ (Kielar); Yeh v. Superior Court
(Sept. 6, 2023, A166537) __ Cal.App.5th __ (Yeh).)
We agree with Ford Warranty’s analysis and that of its progeny. We
conclude the Sale Contract does not contain any language expressly
authorizing Hyundai to enforce the arbitration provision.
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3. Equitable Estoppel
Hyundai also contends Kermani is precluded from challenging
Hyundai’s standing to enforce the Sale Contract’s arbitration provision under
the equitable estoppel doctrine. Hyundai argues Kermani’s claims are
founded in, and intertwined with, the [Sale Contract]. We are not persuaded
by this argument.
a. Governing Principles
A nonsignatory may compel arbitration under an equitable estoppel
theory “when the claims against the nonsignatory are founded in and
inextricably bound up with the obligations imposed by the agreement
containing the arbitration clause.” (Goldman v. KPMG, LLP (2009) 173
Cal.App.4th 209, 219 (Goldman), italics omitted.) “‘“[T]he plaintiff’s actual
dependence on the underlying contract in making out the claim against the
nonsignatory . . . is . . . always the sine qua non of an appropriate situation
for applying equitable estoppel.”’ [Citations.] ‘[E]ven if a plaintiff’s claims
“touch matters” relating to the arbitration agreement, “the claims are not
arbitrable unless the plaintiff relies on the agreement to establish its cause of
action.”’” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306,
italics omitted.)
The purpose of the equitable estoppel doctrine is “to prevent a party
from using the terms or obligations of an agreement as the basis for his
claims against a nonsignatory, while at the same time refusing to arbitrate
with the nonsignatory under another clause of that same agreement.”
(Goldman, supra, 173 Cal.App.4th at p. 221.) “‘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
16
contained in that agreement.’ [Citations.]” (JSM Tuscany, LLC v. Superior
Court (2011) 193 Cal.App.4th 1222, 1237.)
b. Causes of Action
We now refer to the allegations in Kermani’s complaint to determine
whether the equitable estoppel doctrine applies here. (Goldman, supra, 173
Cal.App.4th at pp. 229–230.)
Kermani’s first and second causes of action are based on Hyundai’s
alleged violations of state lemon law (i.e., the Song-Beverly Act). Kermani
alleged Hyundai breached its express and implied warranties to Kermani and
the putative class members. Kermani attached the express written warranty
from Hyundai to the complaint as the basis for the breach of warranty
obligations. Kermani did not allege the Sale Contract provided any basis for
the warranty causes of action, nor did he allege violation of any of the Sale
Contract’s terms.
The Sale Contract does not include warranties or promises regarding
the car’s quality or condition. Rather, the Sale Contract expressly disclaimed
any “express or implied” warranties and stated “there will be no implied
warranties of merchantability or of fitness for a particular purpose.” The
disclaimer stated “[t]his provision does not affect any warranties covering the
vehicle that the vehicle manufacturer may provide.” The Sale Contract’s
“substantive terms . . . relate to sale and financing and nothing more.” (Ford
Warranty, supra, 89 Cal.App.5th at p. 1335 [interpreting an identical sale
contract between a selling dealer and car purchaser].)
Hyundai asserts Kermani’s warranty claims are “intimately founded in
and intertwined with” the Sale Contract because California law treats
warranties as “obligations that are part of the underlying sales contract.” We
17
reject that assertion. “California law does not treat manufacturer warranties
imposed outside the four corners of a retail sale contract as part of the sale
contract.” (Ford Warranty, supra, 89 Cal.App.5th at p. 1335; Greenman v.
Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 60–61 [recognizing a
distinction between warranty obligations a seller owes a buyer under a
contract and the warranty “that arise[ ] independently of a contract of sale
between the parties”]; see also Ngo v. BMW of North America LLC (9th Cir.
2022) 23 F.4th 942, 949 (Ngo) [manufacturer’s express and implied
warranties “arise ‘independently of a contract of sale’”].)4 Kermani’s third
cause of action for unfair business practices under the Unfair Competition
Law is based upon Hyundai’s alleged “decision to knowingly sell defective
Class Vehicles, with no remedy or fix available for the known defect.” Like
the lemon law causes of action, the unfair business practices claim focused on
Hyundai’s alleged bad acts and does not reference, or rely upon, any term of
the Sale Contract.
Kermani’s fourth and final cause of action for breach of the covenant of
good faith and fair dealing is based on Hyundai’s alleged failure to “inform
[Kermani] and potential Class Members of the battery system defect affecting
the Class Vehicles and failing to properly repair this defect.” This claim, like
the others, also does not rely on any provision of the Sale Contract. As
discussed, the Sale contract disclaimed warranties and did not make any
promises or representations relating to the quality of the car, including its
battery system.
4 Our Supreme Court granted review in Ford Warranty to decide
whether manufacturers’ warranties constitute obligations that arise from the
sale contract, permitting manufacturers to enforce an arbitration agreement
under the equitable estoppel doctrine.
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Hyundai asserts that Kermani’s cause of action for breach of the
implied covenant of good faith and fair dealing is “intimately founded in and
intertwined with the underlying contract obligations” of the Sale Contract.
We disagree.
Hyundai also argues that Kermani’s causes of action are intertwined
with the Sale Contract because Kermani seeks “contract remedies” such as
revocation. We do not agree. “[T]he correct analysis is whether Plaintiffs
would have a claim independent of the existence of the Purchase Agreement
. . . not whether the court must look to the Purchase Agreement to ascertain
the requested relief. The emphasis of the case law is unmistakably on the
claim itself, not the relief.” (Kramer, supra, 705 F.3d at pp. 1131–1132.)5
Because none of Kermani’s claims “are founded in and inextricably
bound up with the obligations imposed by the agreement containing the
arbitration clause,” we conclude Hyundai cannot enforce the arbitration
provision under the equitable estoppel doctrine. (Goldman, supra, 173
Cal.App.4th at p. 219, italics omitted.)
4. Third-Party Beneficiary
Hyundai argues it may enforce the arbitration provision as a third-
party beneficiary of the Sale Contract. (See 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”].) We disagree.
5 We note Hyundai makes additional arguments for the first time in its
reply brief to support its contention that the equitable estoppel doctrine
applies here. We do not consider these arguments. (Shaw v. Hughes Aircraft
Co. (2000) 83 Cal.App.4th 1336, 1345–1346, fn. 6 [“[A]n appellant’s failure to
raise an issue in its opening brief [forfeits] it on appeal”].) .
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In Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830
(Goonewardene), our Supreme Court delineated a multifactor test to
determine whether a litigant is a third-party beneficiary to a contract. The
reviewing court should “carefully examine[ ] the express provisions of the
contract at issue, as well as all of the relevant circumstances under which the
contract was agreed to, in order to determine not only (1) whether the third
party would in fact benefit from the contract, but also (2) whether a
motivating purpose of the contracting parties was to provide a benefit to the
third party, and (3) whether permitting a third party to bring its own breach
of contract action against a contracting party is consistent with the objectives
of the contract and the reasonable expectations of the contracting parties.”
(Ibid.)
The express provisions of the Sale Contract do not evidence that
Kermani and the Dealer intended to benefit Hyundai. The language specifies
who may invoke its terms. The initial reference to arbitration in the Sale
Contract stated: “you [Kermani] or we [Dealer] may elect to resolve any
dispute by neutral, binding arbitration and not by a court action.” The
arbitration provision used nearly identical language (“EITHER YOU OR WE
MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY
ARBITRATION”) and reiterated that claims and disputes “shall, at your or
our election, be resolved by neutral, binding arbitration and not by a court
action.” (Italics added.)
Allowing Hyundai to enforce the arbitration provision as a third-party
beneficiary would not be “consistent with the objectives of the contract and
the reasonable expectations of the contracting parties.” (Goonewardene,
supra, 6 Cal.5th at p. 830.) The Sale Contract provided in three separate
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paragraphs that the right to enforce the arbitration provision was limited to
Kermani and the Dealer.
The reference to “‘third parties who do not sign this contract’” does not
give Hyundai standing to compel arbitration. As discussed above, this
reference concerns what may be arbitrated, not who may arbitrate. Read in
context, this language ensures the buyer or seller cannot circumvent the
provision by joining a nonsignatory as a party to the claim or dispute. (See
Ford Warranty, supra, 89 Cal.App.5th at p. 1339, citing Ngo, supra, 23 F.4th
at p. 948 [“Although the arbitration clause may have extended to claims
regarding the purchase of the vehicle, it does not follow that additional
parties can enforce the arbitration clause”].) “The parties’ choice of the
subject of the disputes they agree to arbitrate does not evince an intention to
benefit nonparties so as to affect who is entitled to compel arbitration.” (Ford
Warranty, supra, 89 Cal.App.5th at p. 1339.)
Hyundai contends it was an intended beneficiary of the Sale Contract
because of its alleged “symbiotic business relationship” with the Dealer.
Hyundai’s contention is unavailing. Whether a nonsignatory had a “close
relationship” with a signatory is not relevant to a third-party beneficiary
analysis. (See Goonewardene, supra, 6 Cal.5th at p. 830.)
5. Agency
For the first time on appeal, Hyundai contends that it can enforce the
arbitration agreement because there is an agency relationship between
Hyundai and the Dealer. Hyundai asserts it can enforce the arbitration
agreement because the agreement provided, “Any claim or dispute…between
you and us or our employees, agents, successors or assigns . . . shall, at your
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or our election, be resolved by neutral, binding arbitration and not by a court
action.”
Hyundai forfeited this argument by failing to raise it in the lower court
proceedings. (Perez v. Grajales (2008) 169 Cal.App.4th 580, 591 [“[I]t is
fundamental that a reviewing court will ordinarily not consider claims made
for the first time on appeal which could have been but were not presented to
the trial court’”].)
Regardless, Hyundai’s contention fails on the merits. First, the plain
language of the arbitration provision only relates to claims between Kermani
and Hyundai’s agents. Hyundai purports to be Dealer’s principal, not its
agent. Second, the provision relates to the types of claims that could be
arbitrated, not who may enforce the provision. The provision specifies
disputes will be resolved by binding arbitration “at your or our election.”
(Italics added.) Third, Hyundai has not pointed to any allegations in
Kermani’s complaint or provided evidence from the trial court proceedings to
establish such a relationship between Kermani and Hyundai. (Hernandez v.
Meridian Management Services, LLC (2023) 87 Cal.App.5th 1214, 1220, 1222
[affirming order denying motion to compel arbitration where nonsignatory
defendants contended they could enforce an arbitration provision because
they were agents of the signatories, but failed to offer any evidence they had
authority to act on behalf of the signatory to the arbitration provision].)
//
//
//
//
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DISPOSITION
The order denying Hyundai’s motion to compel arbitration is affirmed.
Kermani is entitled to recover his costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ZUKIN, J.
WE CONCUR:
CURREY, P. J.
COLLINS, J.
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