Subaru of America, Inc. v. Putnam Automotive, Inc.

Filed 2/10/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
SUBARU OF AMERICA, INC.,
Plaintiff and Respondent,
A159686
v.
PUTNAM AUTOMOTIVE, INC., (San Francisco County Super. Ct.
No. CPF-18-516093)
Defendant and Appellant,
Putnam Automotive Inc., doing business as Putnam Subaru
(Putnam), a Subaru dealer, appeals from the trial court’s judgment
confirming an arbitration award in favor of Subaru of America, Inc.
(Subaru), a new motor vehicle distributor. In his final award, the
arbitrator found that Subaru had good cause for terminating an
agreement with Putnam to operate a satellite service-only facility in
San Francisco. On appeal, Putnam contends the judgment should be
reversed and the arbitrator’s final award vacated because (1) the
arbitrator lacked jurisdiction to make a good cause determination under
both federal and state law; (2) enforcement of the arbitration provision in
the agreement was illegal under the Vehicle Code; (3) the public policy
underlying California’s New Motor Vehicle Board Act precluded the
arbitrator from making a good cause determination; (4) the arbitrator’s
award cannot be corrected without affecting the merits of the decision;
and (5) Putnam’s due process rights were violated when Subaru failed to
1
provide it with the required notice of the reasons for terminating the
agreement. We shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In February 2008, after Putnam purchased a service-only Subaru
facility (Satellite Service Facility) in downtown San Francisco from a
former Subaru dealer, Subaru and Putnam entered into a temporary
Subaru “Dealer Candidate Satellite Service Facility Agreement,” which
permitted Putnam to provide Subaru warranty repairs at the Satellite
Service Facility, pending Subaru’s approval of Putnam’s application to
establish an authorized Subaru dealership at a proposed location in
Burlingame. Putnam operated the Satellite Service Facility under the
temporary agreement until issues related to the establishment of the
Burlingame dealership were resolved in March 2009.
On March 25, 2009, Subaru and Putnam entered into a “Subaru
Dealer and Standard Provisions Agreement” (Burlingame Dealer
Agreement) for the sale and service of motor vehicles at the Burlingame
dealership, as well as the operative Subaru Dealer Satellite Service
Facility Agreement (Satellite Service Agreement) for service operations
only at the Satellite Service Facility in San Francisco.
The Satellite Service Agreement, which was operative for an
initial term of five years, contained an arbitration provision, which
stated: “The parties agree that the enforcement, interpretation or any
disputes arising out of this Agreement shall be exclusively resolved
through arbitration in Camden County, New Jersey, conducted under
the Commercial Arbitration Rules of the American Arbitration
Association and shall be governed by the laws of the State of New
Jersey.” (Satellite Service Agreement, § 10.6.)
2
In a September 23, 2013 letter, Subaru informed Putnam that it
was exercising its right to extend the 2009 Satellite Service Agreement
for another five-year period, beginning on March 25, 2014, with “[a]ll
provisions of that Agreement remain[ing] in full force and effect.”
Thereafter, Putnam attempted to engage with Subaru regarding
relocating the Satellite Service Facility, but in a November 6, 2017
letter to Putnam, Subaru stated that it would not approve Putnam’s
proposed relocation of the Satellite Service Facility and would not
renew the Satellite Service Agreement when it expired in 2019.
On November 13, 2017, Putnam filed two administrative protests
with the New Motor Vehicle Board (Board)—a termination protest
under Vehicle Code section 3060, subdivision (a)1 and a modification
protest under section 3060, subdivision (b)—arguing that Subaru did
not have good cause for refusing to approve the proposed relocation of
the Satellite Service Facility and terminating Putnam’s right to
continue to operate that facility upon expiration of the Satellite Service
Agreement.
On March 14, 2018, Subaru filed a petition to compel arbitration
of Putnam’s claims, pursuant to the arbitration provision in the
Satellite Service Agreement.
On June 22, 2018, the trial court entered an order granting the
petition to compel arbitration in part and denying it in part. The court
first found that the Satellite Service Agreement did not come within
the Motor Vehicle Franchise Contract Arbitration Fairness Act
(Fairness Act) (15 U.S.C. § 1226), a narrow exception to the Federal
All statutory references are to the Vehicle Code unless
1
otherwise indicated.
3
Arbitration Act (FAA) (9 U.S.C. § 1 et seq.), and Putnam was therefore
compelled to arbitrate its claims arising from that agreement. The
court, however, denied Subaru’s request to compel Putnam to dismiss
its Board protests because discontinuing the Satellite Service
Agreement might be found to modify the Burlingame Dealer
Agreement, an agreement that would come within the Fairness Act’s
exception to arbitration. The court encouraged the parties to agree to
stay either the arbitration or the Board proceedings, and the parties
ultimately agreed to stay the Board protests pending completion of the
arbitration proceedings.
On April 25, 2019, following a preliminary arbitration proceeding
on choice of law, the arbitrator found that the Satellite Service
Agreement was a franchise under section 331, that California law
applied to the dispute, and that Subaru would be required to show good
cause for termination of the agreement, pursuant to sections 3060 and
3061, in a subsequent arbitration proceeding.
Putnam then unsuccessfully sought summary judgment based on
Subaru’s alleged failure to provide notice of its reasons for terminating
the Satellite Service Agreement, as required under the Vehicle Code.2
On October 1, 2019, following the second arbitration proceeding
on the question of good cause, the arbitrator issued his final award, in
which he found that Subaru had carried its burden to show good cause
for terminating the Satellite Service Agreement.
At the subsequent good cause hearing, the arbitrator did,
2
however, limit Subaru’s good cause argument to the grounds for
termination previously communicated to Putnam.
4
Subaru subsequently filed a petition to confirm the arbitrator’s
final award, and Putnam filed an opposition and a request for the trial
court to vacate the award.
On November 15, 2019, the court entered an order granting
Subaru’s petition to confirm the arbitration award, and on December
18, the court entered a judgment confirming the award.
On January 8, 2020, Putnam filed a notice of appeal from the
judgment confirming the arbitration award and denying Putnam’s
request to vacate the award.
DISCUSSION
In Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6, the
California Supreme Court discussed the appropriate standard for
judicial review of arbitration awards, explaining that with limited
exceptions, “an arbitrator’s decision is not generally reviewable for
errors of fact or law, whether or not such error appears on the face of
the award and causes substantial injustice to the parties.” The merits
of the controversy are not subject to judicial review, including the
validity of the arbitrator’s reasoning and the sufficiency of the evidence
supporting the award. (Id. at p. 11.) Instead, the grounds for vacating
an arbitration award are generally limited to those set forth in Code of
Civil Procedure section 1286.2. (Moncharsh, at p. 28.)
Here, Putnam states that its challenge to the arbitrator’s final
award was permissible because its arguments are based on two of the
grounds for vacating an arbitration award in Code of Civil Procedure
section 1286.2. Specifically, Putnam asserts that the award must be
vacated because the arbitrator “exceeded [his] powers and the award
cannot be corrected without affecting the merits of the decision upon
5
the controversy submitted” (Code Civ. Proc., § 1286.2, subd. (a)(4)) and
because its rights “were substantially prejudiced . . . by other conduct of
the arbitrator[] contrary to the provisions of this title.” (Code Civ.
Proc., § 1286.2, subd. (a)(5).)
Most of Putnam’s contentions require interpretation of state and
federal statutes. Such questions of statutory interpretation are subject
to our independent review. (Lopez v. Sony Electronics, Inc. (2018)
5 Cal.5th 627, 633.) In interpreting a statute, “ ‘[o]ur fundamental task
is to determine the Legislature’s intent and give effect to the law’s
purpose. [Citation.] We begin by examining the statute’s words
“ ‘because they generally provide the most reliable indicator of
legislative intent.’ [Citation.] If the statutory language is clear and
unambiguous our inquiry ends.” ’ [Citation.] In that case, the plain
meaning of the statute is controlling, and ‘ “resort to extrinsic sources
to determine the Legislature’s intent is unnecessary.” ’ [Citation.]” (Id.
at pp. 633–634.)
I. The Arbitrator’s Jurisdiction to Make
a Good Cause Determination
“The United States Supreme Court has recognized that the
‘disparity in bargaining power between automobile manufacturers and
their dealers prompted Congress and some 25 States to enact
legislation to protect retail car dealers from perceived abusive and
oppressive acts by the manufacturers.’ [Citation.]” (Powerhouse
Motorsports Group, Inc. v. Yamaha Motor Corp. (2013) 221 Cal.App.4th
867, 877–878, quoting New Motor Vehicle Bd. v. Orrin W. Fox Co.
(1978) 439 U.S. 96, 100–101.)
Putnam first contends the judgment must be reversed and the
arbitrator’s final award vacated because the arbitrator exceeded his
6
powers under Code of Civil Procedure section 1286.2, subdivision (a)(4),
in that he lacked subject matter jurisdiction to make a good cause
determination under both federal and state law relating to agreements
between motor vehicle manufacturers or distributors and dealers. (See
Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431,
443 [“An arbitrator exceeds his powers when he acts without subject
matter jurisdiction”]; accord, O’Flaherty v. Belgum (2004) 115
Cal.App.4th 1044, 1055 (O’Flaherty.) In particular, Putnam claims the
arbitrator lacked jurisdiction to make a good cause determination
because the Fairness Act (15 U.S.C. § 1226) and California’s New Motor
Vehicle Board Act (§ 3000 et seq.) applied to the Satellite Service
Agreement, as an exception to arbitration.
A. Jurisdiction to Arbitrate Under Federal Law
The federal statute at issue here is the Fairness Act, title 15 of
the United States Code section 1226.3 The Senate Judiciary
Committee’s Report describing the purpose of the legislation explained:
“The Motor Vehicle Franchise Contract Arbitration Fairness Act, S.
1140, is a targeted amendment to the Federal Arbitration Act which
requires that whenever a motor vehicle franchise contract provides for
the use of arbitration to resolve a controversy arising out of or relating
to the contract, arbitration may be used to settle the controversy only if
both parties consent in writing after such controversy arises. This
legislation would allow motor vehicle dealers the option of either going
to arbitration or utilizing procedures and remedies available under
State law such as those involving State-established administrative
3
Title 15 of the United States Code section 1226(a) applies to
contracts entered into after November 2, 2002. (15 U.S.C. § 1226(b).)
7
boards specifically created and uniquely equipped to resolve disputes
between motor vehicle dealers and manufacturers. This legislation is
intended to ensure that motor vehicle dealers are not required to forfeit
important rights and remedies afforded by State law as a condition of
obtaining or renewing a motor vehicle franchise contract.” (Sen.Rep.
No. 107-266, 2d sess. (2002).)
Title 15 of the United States Code section 1226(a) provides in
relevant part:
“(a) Election of arbitration
“(1) Definitions. For purposes of this subsection—[¶] . . . [¶]
“(B) the term ‘motor vehicle franchise contract’ means a contract
under which a motor vehicle manufacturer, importer, or distributor
sells motor vehicles to any other person for resale to an ultimate
purchaser and authorizes such other person to repair and service the
manufacturer’s motor vehicles.
“(2) Consent required. Notwithstanding any other provision of
law, whenever a motor vehicle franchise contract provides for the use of
arbitration to resolve a controversy arising out of or relating to such
contract, arbitration may be used to settle such controversy only if after
such controversy arises all parties to such controversy consent in
writing to use arbitration to settle such controversy.”
Here, in granting Subaru’s petition to compel arbitration, the
trial court found that the Satellite Service Agreement did not come
within the narrow exception to arbitration provided by the Fairness Act
because it did not come within the definition of “motor vehicle franchise
contract” in title 15 of the United States Code section 1226(a)(1)(B), i.e.,
8
“it is not a contract under which motor vehicles are both serviced and
sold.”
Putnam does not argue that, standing alone, the Satellite Service
Agreement falls within the Fairness Act’s exception to arbitration, in
light of the definition of a motor vehicle franchise contract in title 15 of
the United States Code section 1226(a)(1)(B) and the fact that the
Satellite Service Agreement is a contract under which Putnam services,
but does not sell, motor vehicles. Putnam’s claim is that the Satellite
Service Agreement “cannot be viewed in isolation” and must be
considered in conjunction with the Burlingame Dealer Agreement,
under which motor vehicles are both serviced and sold, pursuant to
Civil Code section 1642.
Civil Code section 1642 provides: “Several contracts relating to
the same matters between the same parties, and made as parts of
substantially one transaction, are to be taken together.” Even where
Civil Code section 1642 applies, however, whether two agreements
constitute a single contract depends on the circumstances and intent of
the parties: “ ‘ “While it is the rule that several contracts relating to
the same matters are to be construed together [citation], it does not
follow that for all purposes they constitute one contract.” ’ [Citation.]
The rule is simply a particular application of the more general principle
that ‘[w]e construe [a] contract in light of the circumstances under
which it was made . . . . [Citation.]’ [Citation.]” (Fuentes v. TMCSF,
Inc. (2018) 26 Cal.App.5th 541, 548 (Fuentes).) Moreover, even if two
contracts could be considered one transaction, this fact “is not
dispositive. Rather, just as when any issue turns on contractual
interpretation, we must look to the mutual intent of the parties. (Civ.
9
Code, § 1636;[4] [citation].) ‘ “Such intent is to be inferred, if possible,
solely from the written provisions of the contract.” [Citations.] “If
contractual language is clear and explicit, it governs.” [Citation.]’
[Citation.]” (Fuentes, at p. 549; accord, Versaci v. Superior Court (2005)
127 Cal.App.4th 805, 814 [“The parties’ intent must, in the first
instance, be ascertained objectively from the contract language”].)
According to Putnam, the undisputed evidence in the record
demonstrates that the Satellite Service Agreement should be taken
together with the Burlingame Dealer Agreement to constitute a single
contract “under which a motor vehicle manufacturer . . . or distributor
sells motor vehicles to any other person for resale to an ultimate
purchaser and authorizes such other person to repair and service the
manufacturer’s motor vehicles,” which would satisfy the Fairness Act’s
narrow exemption from the FAA. (15 U.S.C. § 1226(a)(1)(B), italics
added.)
The trial court did not explicitly address whether Civil Code
section 1642 or relevant authority related to ascertaining the parties’
intent applied to the Satellite Service Agreement and the Burlingame
Dealer Agreement, but it’s conclusion that the Satellite Service
Agreement was not a contract under which vehicles are both serviced
and sold makes clear that it did not find that the two agreements
should be treated as one. (See, e.g., City of Brentwood v. Department of
Finance (2020) 54 Cal.App.5th 418, 429 [where record is silent as to
4Civil Code section 1636 provides: “A contract must be so
interpreted as to give effect to the mutual intention of the parties as it
existed at the time of contracting, so far as the same is ascertainable
and lawful.”
10
trial court’s findings on applicability of Civil Code section 1642, “we
presume the court found all facts necessary to support the order”].)5
Putnam acknowledges that the Burlingame Dealer Agreement
does not mention the Satellite Service Agreement, but cites certain
passages in the Satellite Service Agreement that refer to the
Burlingame Dealer Agreement or the Burlingame dealership. For
example, the Satellite Service Agreement requires “that the same
business entity that owns Dealer [i.e., Putnam] shall, for the term of
this Agreement, wholly own the Satellite Service Facility” and that “[if]
Dealer should sell . . any of its ownership interest in the Primary
Dealership, or in the Satellite Service Facility, all rights under the
Agreement shall be null and void and the operation of the Satellite
Service Facility shall immediately cease.” (Satellite Service
Agreement, §§ 3, 4.4.) The Satellite Service Agreement also states that
the Satellite Service Facility “is subject to the same requirements for
service operations applicable to authorized Subaru dealers as set forth
in the Dealer Agreement,” that “Dealer must maintain, in full force
5 The parties disagree about the applicable standard of review of
this issue, with Putnam arguing that de novo review is appropriate and
Subaru claiming that our review should be under the substantial
evidence standard. (Compare City of Brentwood v. Department of
Finance, supra, 54 Cal.App.5th at p. 429 [“Whether Civil Code section
1642 applies is a question of fact for resolution by the trial court, which
we review under the substantial evidence standard”]; id. at p. 428
[“ ‘ “[W]here the issue is one of statutory construction or contract
interpretation, and the evidence is not in dispute, the de novo standard
of review applies [citation]” ’ ”].) We need not resolve this question
because, in the circumstances of this case, the result would be the same
under either standard. We do observe, however, that Putnam does cite
to the testimony of a witness at the first arbitration hearing in arguing
that the two agreements should be considered together.
11
effect, a current and executed Dealer Agreement and be in full
compliance with [that agreement],” and that the Satellite Service
Facility would terminate upon, inter alia, “[t]he termination,
expiration, or cancellation for any reason of the Dealer Agreement . . . .”
(Satellite Service Agreement, §§ 5.1, 7.1, 9.1(A); see also § 5.8.)
This language reflects the parties’ understanding that the
Satellite Service Facility could not exist on its own, without there also
being a primary dealership, and that Putnam must abide by the same
requirements applicable to all Subaru dealers’ service operations. The
Satellite Service Agreement, however, contains numerous additional
terms applicable only to the Satellite Service Facility, including, inter
alia, Putnam’s specific obligations related to that facility; its service
and parts operations; financial requirements; and grounds for
termination of the agreement.
In addition, while the two agreements were first entered into on
the same date, March 25, 2009, they were subject to different terms for
renewal. Specifically, the 2009 Satellite Service Agreement was
extended after its initial five-year term, and therefore remained in
effect for the Satellite Service Facility. On the other hand, the parties
repeatedly entered into new Burlingame Dealer Agreements for the
Burlingame Facility, most recently (according to the record on appeal)
for a three-year term starting in 2017, approximately eight years after
the parties entered into the operative Satellite Service Agreement.
It is also significant that the Burlingame Dealer Agreement,
unlike the Satellite Service Agreement, contains relatively few
individualized provisions. Instead, it incorporates by reference
Subaru’s “Standard Provisions,” consisting of 25 pages of detailed
12
requirements and procedures for dealership operations that are
applicable to all Subaru dealerships.6
Most importantly, in pointing to provisions in the Satellite
Service Agreement that purportedly demonstrate the parties’ intent to
treat the two agreements as one, Putnam ignores language in the first
section of the Satellite Service Agreement that explicitly contradicts its
claim. Under the heading, “Purpose,” the Satellite Service Agreement
states: “This Agreement states the rights and responsibilities of Dealer
and Distributor with respect to the Satellite Service Facility to be
operated by Dealer in Downtown San Francisco. Pursuant to the
Subaru Dealer Agreement . . . , Dealer currently operates an authorized
Subaru dealership located [in Burlingame]. Dealer now seeks to
operate an additional Subaru service facility in Downtown San
Francisco . . . . Distributor hereby approves Dealer’s operation of the
Satellite Service Facility pursuant to the terms of this Agreement. In
consideration for Distributor’s approval of the Satellite Service Facility,
and provided Dealer, at all times during the term of this Agreement,
satisfies the terms and conditions of this Agreement, Distributor shall
consent to Dealer’s continued operation of the Satellite Service
Facility. . . .
6
The first term of the Standard Provisions portion of the
Burlingame Dealer Agreement provides in relevant part: “The
following Standard Provisions are a part of, and are incorporated by
reference into the Subaru Dealer Agreement between Dealer and
Distributor . . . and shall apply to and govern the transactions,
dealings, and relations between Distributor and Dealer . . . . The
Agreement and these Standard Provisions were developed for use by all
Subaru dealers to ensure a degree of nationwide uniformity in Subaru
operations. . . .” (Burlingame Dealer Agreement, Standard Provisions,
§ 1.1.)
13
“Neither this Agreement, nor the termination of this Agreement,
modify (modifies) the [Burlingame] Dealer Agreement entered into by
[Subaru and Putnam] . . . . The parties agree that this Agreement is a
separate, negotiated contract apart from the [Burlingame] Dealer
Agreement, and is supported by consideration separate and apart from
the [Burlingame] Dealer Agreement.” (Satellite Service Agreement, § 1,
italics added.)
This language in the “Purpose” portion of the Satellite Service
Agreement “clear[ly] and explicit[ly]” reflects “the mutual intent of the
parties” for the Satellite Service Agreement to be a separate contract
from the Burlingame Dealer Agreement. (Fuentes, supra, 26
Cal.App.5th at p. 549; see Civ. Code, §§ 1636, 1642; cf. Hartford
Accident & Indem. Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285,
1300 [“Civil Code section 1642 is simply one of the rules referred to in
Civil Code section 1637[7] for aiding in the interpretation of a contract
when the intent of the parties is ‘otherwise doubtful’ ”].)
Putnam nevertheless points to statements in the arbitrator’s
choice of law order that supposedly demonstrate the arbitrator’s belief
that the Satellite Service Agreement and the Burlingame Dealer
Agreement were not separate contracts. The arbitrator did find, as
Putnam observes, an “express, contractual connection between the
Dealer Satellite Service Agreement and the Dealer Agreement” which
“establishes that Subaru entered into the Dealer Satellite Service
Agreement with Putnam in Putnam’s capacity as a Subaru franchisee.”
7Civil Code section 1637 provides: “For the purpose of
ascertaining the intention of the parties to a contract, if otherwise
doubtful, the rules given in this chapter are to be applied.”
14
It is apparent, however, that in making this statement the
arbitrator was not addressing whether the Satellite Service Agreement
and the Burlingame Dealer Agreement were separate contracts.
Rather, he was determining “whether there can be a separate warranty
service franchise agreement” under section 331, which was a necessary
precondition to his ultimate conclusion that Putnam had “entered into
the Dealer Satellite Service Agreement in its capacity as an authorized
Subaru new motor vehicle dealer,” which meant, “as a matter of choice
of law,” that “section 3060 and its good cause requirement apply to any
attempt by [Subaru] to terminate the Dealer Satellite Service
Agreement.”8 (Italics added.)
8
As the arbitrator explained, to constitute a franchise under the
Vehicle Code, “the warranty service agreement can be a contract
separate and apart from a motor vehicle dealership franchise
agreement, but the warranty repair facility provided for in the
warranty service agreement must have been entered into in that
person’s capacity as a new motor vehicle franchisee of the same
manufacturer or distributor.”
Under section 331, subdivision (a)(2), a “franchise” is a written
agreement in which, inter alia, “[t]he franchisee is granted the right to
offer for sale or lease, or to sell or lease at retail new motor vehicles . . .
manufactured or distributed by the franchisor or the right to perform
authorized warranty repairs and service, or the right to perform any
combination of these activities,” which differs from the definition of
“motor vehicle franchise contract” in the Fairness Act. (See 15 U.S.C.
§ 1226(a)(1)(B) [“the term ‘motor vehicle franchise contract’ means a
contract under which a motor vehicle manufacturer, importer, or
distributor sells motor vehicles to any other person for resale to an
ultimate purchaser and authorizes such other person to repair and
service the manufacturer’s motor vehicles”].) Thus, when the arbitrator
found that the Satellite Service Agreement was a franchise under
California law, he was referring to that term as it is defined in the
Vehicle Code only.
15
Putnam also ignores additional statements in the choice of law
order that contradict its assertion that the arbitrator found that the
two agreements were not separate. For example, the arbitrator
acknowledged that the trial court had “ruled implicitly if not explicitly
that the . . . Satellite Service Agreement is a separate agreement from
the Burlingame dealership agreement because it ordered this matter to
arbitration” and that, “[h]ad the court considered the Dealer Satellite
Service Agreement to be a part of the Burlingame dealership
agreement (as is the warranty service facility operated at the location
of the Burlingame dealership), the exception to arbitration under the
Federal Arbitration Act and the California Vehicle Code would have
applied to prevent arbitration of this matter.”
In sum, based on the language of both the Satellite Service
Agreement as whole—including the unambiguous statement in the
“Purpose” section of the agreement that it was “a separate, negotiated
contract apart from the Dealer Agreement”—and the Burlingame
Dealer Agreement, we find that the two agreements were not intended
to constitute a single contract. They therefore cannot be considered
together for purposes of the Fairness Act’s narrow exception to the
FAA. (See Fuentes, supra, 26 Cal.App.5th at pp. 548–549; Hartford
Accident & Indem. Co. v. Sequoia Ins. Co., supra, 211 Cal.App.3d at
p. 1300; §§ Civ. Code, 1636, 1637, 1642.)9 We agree with the trial
9
Putnam cites several cases from other jurisdictions for their
recognition of “the principle of law that agreements can be taken
together for purposes of the [Fairness Act].” While this is a correct
general principle, these cited cases simply looked to the various terms
of the agreements at issue to determine the parties’ intent, just as we
have done in this case. (See Arciniaga v. General Motors Corp. (2d Cir.
2006) 460 F.3d 231; Pride v. Ford Motor Co. (N.D.Miss. 2004) 341
16
court’s implicit finding that the Satellite Service Agreement is a
separate contract, on which it based its finding that the agreement does
not come within the Fairness Act’s definition of a motor vehicle
franchise contract because it is not a contract under which motor
vehicles are both serviced and sold. (See 15 U.S.C. § 1226(a)(1)(B) &
(a)(2).)10
B. Jurisdiction to Arbitrate Under California Law
Putnam next points to California law, specifically sections 3060
and 11713.3, in support of its claim that the Board, not the arbitrator
had jurisdiction over its dispute with Subaru.
“Section 3000 et seq. and section 11700 et seq. establish a
statutory scheme regulating the franchise relationship between vehicle
manufacturers and distributors, and their dealers. [Citation.] The
purpose of this scheme is ‘ “to avoid undue control of the independent
new motor vehicle dealer by the vehicle manufacturer or distributor
F.Supp.2d 617; see also General Motors, LLC v. Hall Chevrolet, LLC
(E.D.Va. 2015) 2015 WL 6830309 at p. *6 [parties intended an
exclusivity contract to be separate from a dealer agreement to which
exclusivity contract made multiple references and relied on for some
terms, based in part on facts that exclusivity contract was a separately
negotiated contract for which separate consideration was paid and each
contract was for a separate term of years, with dealer agreement
requiring frequent renegotiation].)
In its order on Subaru’s motion to compel arbitration, the court
10
found that the Burlingame Dealer Agreement, by contrast, was covered
by the Fairness Act’s exception to arbitration, since it “regards the sale
and service of motor vehicles,” i.e., is a motor vehicle franchise contract.
(See 15 U.S.C. § 1226(a)(1)(B), (a)(2).) The court therefore denied
Subaru’s request to “compel Putnam to dismiss its New Motor Vehicle
Board protests, because discontinuing the service agreement might be
found to modify—and/or, less plausibly, terminate—the dealer
agreement,” over which the Board would have jurisdiction.
17
and to insure that dealers fulfill their obligations under their
franchises and provide adequate and sufficient service to consumers
generally.” ’ (Historical and Statutory Notes, 65B West’s Ann. Veh.
Code (2000 ed.) foll. § 3000, p. 371; citation.)” (Powerhouse Motorsports
Group, Inc. v. Yamaha Motor Corp., supra, 221 Cal.App.4th at p. 877.)
The relevant statutes include section 331, which defines a
“franchise” as “a written agreement between two or more persons
[meeting certain listed] conditions”; section 331.1, which defines a
“franchisee” as “any person who, pursuant to a franchise, receives new
motor vehicles . . . from the franchisor and who offers for sale or lease,
or sells or leases the vehicles at retail or is granted the right to perform
authorized warranty repairs and service, or the right to perform any
combination of these activities”; and section 331.2, which defines a
“franchisor” as “any person who manufactures, assembles, or
distributes new motor vehicles . . . and who grants a franchise.”
In addition, section 3050, subdivision (c), states that the Board
shall, inter alia, “[h]ear and decide, within the limitations and in
accordance with the procedure provided, a protest presented by a
franchisee pursuant to Section 3060 . . . .” Section 3060 prohibits a
franchisor from terminating a franchise unless it gives the franchisee
and the Board written notice of the proposed termination, establishes
“good cause” for the termination, and gives the franchisee the right to
file a protest. (§ 3060, subds. (a)(1), (2).) In addition, after a protest
has been filed with the Board, “the franchisor may not terminate or
refuse to continue until the [B]oard makes its findings.” (§ 3060, subd.
(a)(2).) Section 3061 sets forth a list of nonexclusive factors for the
18
Board to consider when determining whether a franchisor has
established good cause for terminating a franchise.
Finally, section 11713.3 sets forth a list of acts that are unlawful
when committed by a vehicle manufacturer or distributor against a
dealer, including termination of “a franchise in violation of Article 4
(commencing with Section 3060) . . . of Chapter 6 of Division 2.”
(§ 11713.3, subd. (l).)
Putnam again contends the arbitrator lacked subject matter
jurisdiction under state law to determine whether Subaru had good
cause for terminating the Satellite Service Agreement because all such
determinations must be made by the Board, pursuant to the New Motor
Vehicle Board Act, as reflected in the language of section 3060,
subdivision (a)(2), which provides for a franchisee to file a protest with
the Board and precludes a franchisor from terminating a franchise
until the Board determines whether the franchisor had good cause to do
so, following a hearing. Moreover, according to Putnam, the trial court
wrongly found that section 11713.3, subdivision (g) permitted
arbitration of Putnam’s protest, notwithstanding the language in
section 3060.
In its order granting Subaru’s petition to confirm the final
arbitration award, the trial court stated: “Putnam says the arbitrator
should have stopped arbitrating after his April 2019 [choice of law]
order, because the New Motor Vehicle Board has ‘exclusive jurisdiction’
to adjudicate whether good cause exists not to continue a franchise
agreement. However, the very statutory subdivision Putnam cites—
[section 11713.3, subdivision (g)]—provided to the contrary: ‘This
subdivision does not, however, prohibit arbitration before an
19
independent arbitrator.’ ” The court noted that “[t]his law applied to
‘any contract entered into on or before December 31, 2011’ [§ 11713.3,
subd. (g)(3)(D)], and the Agreement was entered in 2009.”
We agree with the trial court’s conclusion. Putnam’s claim that
the Board had exclusive jurisdiction over its termination protest and
that subdivision (g) of section 11713.3 prohibited enforcement of the
arbitration provision is based on a complete misreading of that
subdivision.
First, as the trial court stated, the version of section 11713.3,
subdivision (g) that was in effect when the parties entered into the
Satellite Service Agreement in 2009, and which was still the operative
agreement when this dispute arose, provided in relevant part:
“It is unlawful and a violation of this code for any manufacturer
. . . licensed under this code to do any of the following: [¶] . . . [¶]
“(g) To require . . . any controversy between a dealer and a
manufacturer [or distributor] to be referred to any person other than
the board, if the referral would be binding on the dealer. This
subdivision does not, however, prohibit arbitration before an
independent arbitrator.” (Former § 11713.3, subd. (g), italics added.)
Thus, the applicable version of the statute expressly excepts an
agreement to arbitrate from the prohibition against any controversies
between dealers and manufacturers or distributors being referred to
anyone other than the Board. The applicability of former section
11713.3, subdivision (g) to the 2009 Satellite Service Agreement is also
reflected in language of the current version of the statute, which
provides in relevant part:
20
“It is unlawful and a violation of this code for any manufacturer
[or distributor] licensed pursuant to this code to do . . . any of the
following: [¶] . . . [¶]
“(g)(1) Except as provided in paragraph 3, to obtain from a dealer
or enforce against a dealer an agreement [or] provision . . . that does
any of the following: [¶] . . . [¶]
“(D) Requires a controversy between a manufacturer [or a
distributor] and a dealer to be referred to a person for a binding
determination. . . .”
“(3) This subdivision does not do any of the following: [¶] . . . [¶]
“(D) Affect the enforceability of a provision in any contract entered
into on or before December 31, 2011.” (§ 11713.3, subds. (g)(1)(D) &
(g)(3)(D), italics added.)11
Thus, the current statute makes clear that arbitration provisions
in contracts entered into before 2012 are governed by former section
11713.3, which expressly “does not . . . prohibit arbitration before an
independent arbitrator” in any circumstances. (Former § 11713.3,
subd. (g).)12
11 The language in current section 11713.3, subdivision (g) was
added in an amendment, with an effective date of January 1, 2012 (see
Stats. 2011, ch. 342, § 3). Former section 17313.3, subdivision (g) was
in effect when the parties entered into the Satellite Service Agreement
(see Stats. 2006, ch. 353, § 1).
12 Putnam asserts that because the Satellite Service Agreement
was extended in 2014, subdivision (g)(3)(D) of current section 11713.3 is
inapplicable. It is apparent from the record, however, that the parties,
the trial court, and the arbitrator considered the 2009 Satellite Service
Agreement—which was extended but never replaced—the operative
agreement. Putnam also asserts that because Subaru sought to enforce
the arbitration provision in the Satellite Service Agreement against
Putnam after December 31, 2011, “even if obtaining the agreement
21
Second, the provision in the current version of section 17313.3,
subdivision (g), on which Putnam relies, also fails to support its claim
that the Board had sole jurisdiction to resolve the present dispute.
Subdivision (g)(1)(D) of section 11713.3 provides that, except as
provided in subdivision (g)(3), it is unlawful for a vehicle manufacturer
or distributor to enforce an agreement that requires a controversy with
“a dealer to be referred to a person for a binding determination.”
(§ 11713.3, subd. (g)(1)(D).) Importantly, this provision then states:
“However, this subparagraph does not prohibit arbitration before an
independent arbitrator, provided that whenever a motor vehicle
franchise contract provides for the use of arbitration to resolve a
controversy arising out of, or relating to, that contract, arbitration may
be used to settle the controversy only if, after the controversy arises, all
parties to the controversy consent in writing to use arbitration to settle
the controversy. For the purpose of this subparagraph, the terms ‘motor
vehicle’ and ‘motor vehicle franchise contract’ shall have the same
meanings as defined in Section 1226 of Title 15 of the United States
Code. . . .” (§ 11713.3, subd. (g)(1)(D), italics added.)
Subdivision 11713.3 thus tracks the language of the Fairness Act,
providing a limited exception to enforcement of arbitration agreements
for motor vehicle franchise contracts, as that phrase is defined in that
Act. (See 15 U.S.C. § 1226(a)(1)(B).) In addition, just as the Fairness
Act permits arbitration to resolve a controversy relating to a motor
prior to December 31, 2011 was considered lawful, attempting to
enforce the agreement after December 31, 2011, is a separate unlawful
act.” Putnam disregards the plain language of the statute, which,
again, provides that subdivision (g) does not “[a]ffect the enforceability
of a provision in any contract entered into on or before December 31,
2011.” (§ 11713.3, subd. (g)(3)(D), italics added.)
22
vehicle franchise contract “only if after such controversy arises all
parties to such controversy consent in writing to use arbitration to
settle such controversy” (15 U.S.C. § 1226(a)(2)), subdivision (g)(1)(D) of
Vehicle Code section 11713.3 uses nearly identical language,
permitting arbitration to settle a controversy arising from a “motor
vehicle franchise contract” “only if, after the controversy arises, all
parties to the controversy consent in writing to use arbitration to settle
the controversy.”
Thus, by including in section 11713.3, subdivision (g) virtually
the same language as that in the Fairness Act’s narrow exception to
arbitration of motor vehicle related disputes, the Legislature avoided
conflict with the FAA, since any broader categorical attempt to reserve
otherwise arbitrable disputes for resolution by a state-established
administrative board would necessarily be subject to preemption by the
FAA. (See AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 351
(Concepcion) [“States cannot require a procedure that is inconsistent
with the FAA, even if it is desirable for unrelated reasons”]; see also
Preston v. Ferrer (2008) 552 U.S. 346, 356 [California Labor Code
section giving Labor Commissioner exclusive original jurisdiction over
certain disputes “conflict[ed] with the FAA’s dispute resolution regime”
by “grant[ing] the Labor Commissioner exclusive jurisdiction to decide
an issue that the parties agree to arbitrate”]; Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1124 [holding, in light of Concepcion,
that FAA preempted a state law rule categorically prohibiting waiver of
a “Berman hearing” (i.e., “a dispute resolution forum established by the
23
Legislature to assist employees in recovering wages owed”) in a
predispute arbitration agreement].)13
We have already determined, in part I.A., ante, that the Satellite
Service Agreement is not a motor vehicle franchise contract covered by
the Fairness Act’s exception to arbitration because it is not a contract
under which vehicles are serviced and sold. Likewise, the nearly
identical prohibition against involuntary arbitration of disputes
contained in subdivision (g)(1)(D) of section 11713.3 is inapplicable to
the Satellite Service Agreement. The portion of subparagraph (D) that
would be applicable to the Satellite Service Agreement (were the
agreement not excepted from the requirements of current subdivision
(g)(1)(D)) provides that “this subparagraph does not prohibit
arbitration before an independent arbitrator . . . .” (§ 11713.3,
subd. (g)(1)(D).)
In short, notwithstanding the language Putnam cites in section
3060 regarding the Board’s authority to make good cause
determinations, under both former and current section 11713.3,
subdivision (g), the arbitration provision in the Satellite Service
Agreement controls.
II. Legality of the Arbitration Provision Under Section 11713.3
Putnam next contends that, regardless of whether the parties’
agreement to arbitrate in the Satellite Service Agreement was
otherwise valid, the arbitrator exceeded his powers “by rendering an
award where the underlying agreement to arbitrate is illegal.” (See
As the arbitrator noted in his final award, “[t]he obvious
13
purpose of Section 11713.3[, subdivision] (g) is to limit the exception
from pre-dispute arbitration agreements to the statutory exemption
provided in 15 U.S.C. [section] 1226.”
24
Loving & Evans v. Blick (1949) 33 Cal.2d 604, 610 [cited by Putnam, in
which Supreme Court stated: “[I]t is generally held that ‘a claim
arising out of an illegal transaction is not a proper subject matter for
submission to arbitration, and that an award springing out of an illegal
contract, which no court can enforce, cannot stand on any higher
ground than the contract itself’ ”]; see also Concepcion, supra, 563 U.S.
at p. 339 [FAA contains a savings clause that “permits arbitration
agreements to be declared unenforceable ‘upon such grounds as exist at
law or in equity for the revocation of any contract’ ”]; O’Flaherty, supra,
115 Cal.App.4th at pp. 1055–1056 [“ ‘An arbitrator exceeds his powers
when he . . . upholds an illegal contract’ ”].)
According to Putnam, the arbitration provision in the Satellite
Service Agreement was illegal under two terms of current section
11713.3 that do not specifically target arbitration, but instead “prohibit
any interference with Putnam’s rights to pursue the protests before the
Board and make unlawful agreements requiring Putnam to terminate
its franchise.” These two subparagraphs make it unlawful for a vehicle
manufacturer or distributor to enforce against a dealer an agreement
that “[l]imits or constrains the right of a dealer to file, pursue, or
submit evidence in connection with a protest before the board”
(§ 11713.3, subd. (g)(1)(B)) or that “[r]equires a dealer to terminate a
franchise” (§ 11713.3, subd. (g)(1)(C)).
In its order confirming the final arbitration award, the trial court
addressed this contention, as follows: “Putnam belatedly argues that
two other [section 11713.3, subdivision (g)] provisions rendered the
Agreement’s arbitration clauses ‘illegal.’ One bars a manufacturer
from limiting a dealer’s evidence if there is ‘a protest before the board.’
25
(Id. at (1)(B).) The other keeps a manufacturer from requiring a dealer
‘to terminate a franchise,’ which clearly means terminate without legal
process. (Id. at (1)(C).) Neither provision bars arbitration.” We agree
with the trial court’s interpretation of these two provisions.
First, considering our conclusion that arbitration is permitted
under both the current and former versions of section 11713.3 (see
pt. I.B., ante), it would be absurd to then construe subdivision (g)(1)(B)
in isolation as forbidding arbitration and requiring that all protests be
heard solely by the Board. (See, e.g., Star Athletica, L.L.C. v. Varsity
Brands, Inc. (2017) 137 S.Ct. 1002, 1010 (Star Athletica)
[“ ‘[I]nterpretation of a phrase of uncertain reach is not confined to a
single sentence when the text of the whole statute gives instruction as
to its meaning’ ”]; Satele v. Superior Court (2019) 7 Cal.5th 852, 858
(Satele) [“We consider [statutory] language in the context of the entire
statute and the statutory scheme of which it is a part”].) In context, the
provision precludes a manufacturer or distributor from limiting a
dealer’s right to submit evidence “in connection with a protest,” if that
protest is “before the Board.” (§ 11713.3, subd. (g)(1)(B); see also Star
Athletica, at p. 1010; Satele, at p. 858.)
As to subdivision (g)(1)(C) of section 11713.3, this provision
obviously is not a blanket prohibition against a manufacturer or
distributor “[r]equir[ing] a dealer to terminate a franchise.” As the
trial court stated, the provision bars such a termination “without legal
process.” Putnam’s argument that this provision makes it illegal to
require a dealer to submit a dispute to arbitration, through which it
might be required to terminate a franchise, ignores both common sense
and the context of this provision within the statute as a whole, which
26
allows disputes to be resolved by arbitration in circumstances that we
have found applicable here. (See § 11713.3, subd. (g)(1)(D), (3)(D); see
also Star Athletica, supra, 137 S.Ct. at p. 1010; Satele, supra, 7 Cal.5th
at p. 858.)
Accordingly, considering these provisions in the context of the
entire statute, neither one makes illegal the enforcement of the parties’
agreement to arbitrate their disputes.
III. Arbitrator’s Good Cause Determination and Public Policy
Putnam contends the arbitrator exceeded his powers when he
made a good cause determination in his final award, contrary to the
public policy underlying the New Motor Vehicle Board Act and the
Fairness Act. (See Code Civ. Proc., § 1286.2, subd. (a)(4); O’Flaherty,
supra, 115 Cal.App.4th at pp. 1055–1056 [“ ‘An arbitrator exceeds his
powers when he . . . issues an award that violates a well-defined public
policy’ ”].)
Putnam cites to the purpose of both the Fairness Act and the
New Motor Vehicle Board Act, maintaining that permitting arbitration
of the parties’ dispute undermines the intent of both Acts, which were
created to protect motor vehicle dealers from unfair trade practices by
manufacturers or distributors and to ensure that dealers have the
opportunity to exercise their rights before specialized state boards.
(See Sen.Rep. No. 107-266, 2d sess. (2002); see also Ri-Joyce, Inc. v.
New Motor Vehicle Board (1992) 2 Cal.App.4th 445, 456, fn. 4 [New
Motor Vehicle Board Act “was intended to protect new motor vehicle
dealers against unfair or oppressive trade practices”].)
As we have explained, however, both the Fairness Act and
Vehicle Code exceptions to arbitration, by their terms, apply only to
27
motor vehicle franchise contracts as defined in title 15 of the United
States Code section 1226(a)(1)(B), and the Satellite Service Agreement
is not such a contract. (See pt. I., ante; see also Lopez v. Sony
Electronics, Inc., supra, 5 Cal.5th at pp. 633–634 [if statutory language
is unambiguous, plain meaning of statute controls, and resort to
Legislature’s intent is unnecessary].)
Putnam nonetheless asserts that “[i]f the award is not vacated, it
will be the first and only termination of a franchise in California since
the enactment of [section] 11713.3[, subdivision] (g) where the
franchisor was not required to prove good cause before the Board,” and
that this “will set a dangerous precedent of allowing manufacturers to
separate sales and service agreements and circumvent the Board’s
jurisdiction by seeking to terminate the service portions of those
agreements by way of arbitration and not before the Board.” But
Subaru was not attempting to terminate the “service portion[]” of a
larger dealer agreement. We have found that the Satellite Service
Agreement and the Burlingame Dealer Agreement are separate
contracts, and that only the Burlingame Dealer Agreement comes
within the Fairness Act and section 11713.3’s narrow exception to
arbitration, because it is a contract under which vehicles are both
serviced and sold. (See 15 U.S.C. § 1226(a)(1)(B); Veh. Code, § 11713.3,
subd. (g)(1)(D); see also pt. I., ante.) We are not permitted to second-
guess Congress’s decision to create the Fairness Act’s narrow exception
to the FAA, which by its terms does not apply to the Satellite Service
Agreement. (See Concepcion, supra, 563 U.S. at p. 351; Preston v.
Ferrer, supra, 552 U.S. at p. 356; Sonic-Calabasas A, Inc. v. Moreno,
supra, 57 Cal.4th at p. 1124.)
28
Finally, Putnam questions the basis for the arbitrator’s finding of
good cause, asserting that the finding “is disconnected from how the
Board views good cause” and that the arbitrator “bases a central
portion of his decision on the idea [that Subaru] can deny Putnam’s
request to relocate to a larger facility, but then use Putnam’s inability
to relocate to a larger facility as a basis for finding good cause to
terminate.” This argument is essentially an attempt to call into
question the factual and legal findings of the arbitrator, which is
impermissible. (See Moncharsh v. Heily & Blase, supra, 3 Cal.4th at
p. 11.)14
IV. Alleged Due Process Violation
Putnam contends Subaru’s failure to provide notice of the reasons
for its nonrenewal of the Satellite Service Agreement requires that the
final award be vacated because Putnam’s due process rights “were
substantially prejudiced . . . by other conduct of the arbitrator[]
contrary to the provisions of this title.” (Code Civ. Proc., § 1286.2,
subd. (a)(5).)
Section 3060, subdivision (a) provides that “no franchisor shall
terminate or refuse to continue any existing franchise unless . . . [¶] (1)
The franchisee and the board have received written notice from the
franchisor as follows: [¶] (A) Sixty days before the effective date
thereof setting forth the specific grounds for termination or refusal to
continue.” (§ 3060, subd. (a)(1)(A); see American Isuzu Motors v. New
Motor Vehicle Bd. (1986) 186 Cal.App.3d 464, 477 [“To permit a
franchisor to later raise additional unspecified grounds at the [good
We also note that the arbitrator engaged in a detailed analysis
14
and weighing of the relevant factors set forth in section 3061 before
making his good cause determination, as set forth in the final award.
29
cause] hearing would be to deny the franchisee the notice prior to
hearing guaranteed under [section 3060, subdivision (a)]; such denial
infringes on the franchisee’s right to procedural due process and cannot
be allowed”].)
A. Background
In his final award, the arbitrator included a summary of the
correspondence between the parties concerning Subaru’s decision not to
extend the Satellite Service Agreement for an additional five years:
“Following the September 13, 2013 extension, [Putnam] attempted to
engage [Subaru] with regard to relocating the downtown San Francisco
satellite service facility. However, as evidenced by [Putnam’s] letter of
September 7, 2017, [Putnam] conditioned its proposed relocation on
obtaining a ‘standard dealer agreement’ for the new location.
[Citation.] [Subaru] rejected [Putnam’s] proposal by letter, dated
November 6, 2017: ‘Per our discussions regarding your recent
proposal(s) for relocation of the Downtown Service Point, [Subaru] will
not approve any move of the current facility, nor will [Subaru]
participate financially in the purchase or remodel of a new facility. Our
intent remains to serve-out the remainder of the service agreement
between Putnam Automotive and [Subaru], and we will not renew our
agreement at that time.’ [Citation.] Thereafter, on September 7, 2018,
[Subaru] sent [Putnam] a letter confirming that ‘[Subaru] will not
renew the Service Agreement when it expires on or about March 24,
2019. In light of the existing circumstances in the applicable market
area, and giving due consideration to all such circumstances, [Subaru]
has determined that not renewing the Service Agreement will better
30
serve the brand, the retailer network and Subaru customers over the
longer term.’ [Citation.]”
Near the conclusion of the second arbitration hearing, the
following exchange, referred to by the trial court in its order confirming
the final arbitration award,15 took place between the arbitrator and
counsel for Putnam regarding Putnam’s notice of Subaru’s reasons for
termination of the Satellite Service Agreement. The arbitrator first
asked if counsel had had “a full and fair opportunity to present
everything you wanted to support your case,” to which Putnam’s
counsel responded, “The only written statement of why this dealership
has ever been terminated is the expiration of the term. So we have had
an adequate opportunity to respond to all of the evidence that was
testified to here today.” After counsel affirmed that “we do have actual
knowledge of what their arguments are for termination now at the
hearing,” the arbitrator asked, “do you need something else—some
other procedures—some other witnesses, some other time to respond to
the reasons that you have heard?” Counsel responded, “I don’t believe
so.”
In his final award, the arbitrator further addressed the notice
issue, first stating that although the reasons Subaru gave for
nonrenewal of the Satellite Service Agreement “are rather broad,
considerable leeway should be afforded here because of the unusual
posture of this case and the extensive back-and-forth between [Subaru]
15
The trial court stated in its order that “Putnam also belatedly
claims it lacked notice of Subaru’s reasons for the nonrenewal [of the
Satellite Service Agreement]. But Putnam conceded at the arbitration
that it had ‘actual notice’ of the reasons and ‘a full and fair opportunity
to present everything [it] wanted to support [its] case.’ [Citation.]”
31
and [Putnam] regarding the adequacy of the San Francisco Downtown
service facility to accommodate customers in the market area.
Accordingly, I have considered [Subaru’s] market/brand-based
customer service reasons for non-renewal of the Dealer Satellite Service
Agreement. Pursuant to my findings above, I have not considered the
alleged breaches of the Dealer Satellite Service Agreement that were
not specified in [Subaru’s] notice of non-renewal as support for
[Subaru’s] decision not to renew.”16
B. Legal Analysis
Putnam now asserts that although it “gained actual knowledge of
[Subaru’s] grounds for proposed termination during the hearing before”
the arbitrator, “the delay in receiving notice of [Subaru’s] reasons for
proposed termination limited Putnam’s ability to prepare for the
hearing.” Putnam states that this is one of those “ ‘limited and
exceptional circumstances justifying judicial review of an arbitrator’s
decision’ ” to protect a party’s statutory rights. (Board of Education v.
Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 275; see also Code
Civ. Proc., § 1286.2, subd. (a)(5).)
Even assuming Putnam may now challenge the arbitrator’s
factual finding that Putnam had received actual notice of Subaru’s
ground for termination of the Satellite Service Agreement, the
reporter’s transcript of the arbitration hearing belies Putnam’s claim
that it was unable to prepare for the hearing, considering that counsel
16
The arbitrator had earlier determined that it would not allow
Subaru to present evidence regarding Putnam’s purported breach of
contract due to its failure to provide Putnam with prior notice of those
grounds for termination of the Satellite Service Agreement. (See
American Isuzu Motors v. New Motor Vehicle Bd., supra, 186
Cal.App.3d at p. 477.)
32
responded in the negative to the arbitrator’s inquiry as to whether
Putnam needed “something else—some other procedures—some other
witnesses, some other time to respond to the reasons that you have
heard.” Moreover, as the arbitrator pointed out in the final award, the
parties had engaged in “extensive back-and-forth . . . regarding
adequacy of the San Francisco Downtown service facility to
accommodate customers in the market area,” which meant that
Putnam already had actual notice of the reasons for the termination.
Considering the record as a whole, Putnam has not shown that its
rights “were substantially prejudiced” by the arbitrator’s alleged failure
to abide by section 3060’s notice requirements when it proceeded with
the arbitration. (Code Civ. Proc., § 1286.2, subd. (a)(5).)
In conclusion, for all of the reasons discussed in this opinion, the
trial court correctly granted Subaru’s petition to compel arbitration and
its subsequent petition to confirm the arbitrator’s final award.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to
Subaru.
33
_________________________
Kline, P.J.
We concur:
_________________________
Stewart, J.
_________________________
Miller, J.
Subaru of America, Inc. v. Putnam Automotive, Inc. (A159686)
34
Trial Court: San Francisco County Superior Court
Trial Judge: Hon. Richard B. Ulmer
Attorneys for Appellant: Law Offices of Gavin M. Hughes
Gavin M. Hughes
Robert A. Mayville, Jr.
Attorneys for Respondent: Nelson Mullins Riley & Scarborough
Lisa M. Gibson
Crispin L. Collins
35