Jensen v. U-Haul Co. of Cal.

• Decision Date: 11 December 2017
• Docket Number: E065887
• Citation: 226 Cal.Rptr.3d 797,18 Cal.App.5th 295
• Court: California Court of Appeals Court of Appeals
• Parties: Virgil JENSEN et al., Plaintiffs and Respondents, v. U-HAUL CO. OF CALIFORNIA, Defendant and Appellant.

18 Cal.App.5th 295

226 Cal.Rptr.3d 797

Virgil JENSEN et al., Plaintiffs and Respondents,

v.U-HAUL CO. OF CALIFORNIA, Defendant and Appellant.

E065887

Court of Appeal, Fourth District, Division 2, California.

Filed December 11, 2017

Alston & Bird, Todd B. Benoff and Jesus J. Torres, Los Angeles, for Defendant and Appellant.

Law Offices of Steven Zwick, Steven Zwick and James Alquist, Mission Viejo, for Plaintiffs and Respondents.

OPINION

CODRINGTON, J.

I. INTRODUCTION

In this tort action, plaintiffs and respondents Virgil Jensen and Glenda Jensen contend that they suffered damages caused by a negligently maintained rental truck, which blew a tire while Virgil Jensen was driving it. Defendant and appellant U-Haul Co. of California (UHCA) appeals from the trial court's denial of its motion to compel arbitration. UHCA contends that plaintiffs are bound by the arbitration agreement in the rental contract, even though neither plaintiff is a party to that contract. We affirm the trial court's ruling.

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs brought suit on April 13, 2015, alleging causes of action for negligence and (as to Glenda Jensen only) loss of consortium. UHCA subsequently filed a motion to compel arbitration and to stay further proceedings in the trial court. In relation to UHCA's motion, the parties submitted a stipulation agreeing to the following facts:

"1. On July 11, 2013, Plaintiff Virgil Jensen was an employee of CTS Global Products, USA, Inc. (‘CTS').

"2. On July 11, 2013, Charles Scannell, Mr. Jensen's supervisor, rented a truck from UHCA.

"3. Plaintiff Virgil Jensen was hired as a warehouse worker for CTS.

"4. On July 11, 2013, Mr. Scannell instructed Plaintiff Virgil Jensen to use the UHCA truck to transport CTS's massage chairs and exercise machines to the Sacramento State Fair. This was allegedly the first time that Mr. Jensen ever drove a truck on behalf of CTS.

"5. On July 11, 2013, Plaintiff followed Mr. Scannell's instructions and transported CTS's massage chairs and exercise machines in the UHCA truck to the California State Fair. During the trip, Plaintiff was allegedly injured when the tire on the UHCA truck blew out (‘the Incident’).

"6. Plaintiff filed a worker's compensation claim against CTS regarding the Incident alleged in his Complaint arising out of his use of the UHCA truck.

"7. The parties agreed that Plaintiff's alleged injuries occurred during the course and scope of his employment with CTS—that at the time of the Incident alleged in the Complaint, Plaintiff Virgil Jensen was acting at the direction of CTS.

"8. At the time of the Incident, Plaintiff Virgil Jensen allegedly had no knowledge of an alleged Agreement to Arbitrate Claims under the UHCA rental agreement, and Mr. Jensen had never signed the UHCA rental agreement."

In support of its motion, UHCA also presented evidence that an arbitration agreement is incorporated into each of its rental contracts, including the one signed by Mr. Scannell. The arbitration agreement provides that "You and U-Haul agree that any and all Claims ... between You and U-Haul relating in any way to your rental ... from U-Haul shall be submitted to binding Arbitration ...." It defines the term " ‘You’ " to include "You and Your respective ... agents, employees ... [and] all authorized or unauthorized users of the U-Haul equipment ...." The term " ‘Claim’ " is defined "broadly" to include "any and all legal theories, including but not limited to, all statutory and tort claims, that may be asserted by You."

Additionally, UHCA presented evidence that Mr. Scannell is not only Mr. Jensen's supervisor, but also the owner, chief executive officer, chief financial officer, secretary, and sole director of CTS.

The trial court denied UHCA's motion.

III. DISCUSSION

A. Standard of Review.

"In general, ‘[t]here is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court's denial rests solely on a decision of law, then a de novo standard of review is employed.’ " ( Laswell v. AG Seal Beach, LLC (2010) 189 Cal.App.4th 1399, 1406, 117 Cal.Rptr.3d 310.) In the absence of conflicting extrinsic evidence, " ‘[w]hether and to what extent [nonsignatories] can also enforce the arbitration clause is a question of law, which we review de novo.’ " ( Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 708, 111 Cal.Rptr.3d 876.)

B. Analysis.

There is no doubt that plaintiffs' claims fall within the extremely broad scope of the arbitration agreement at issue. It is undisputed that Virgil Jensen was a "user" of the UHCA equipment—we need not decide whether he was an "authorized" or "unauthorized" user, since the agreement purports to encompass both—and plaintiffs' claims arise from his use of that equipment. Nevertheless, whatever the breadth of the contractual language, plaintiffs can only be forced to arbitrate their claims if they are bound by the arbitration agreement entered into by Mr. Scannell and UHCA.

"Persons are not normally bound by an agreement entered into by a corporation in which they have an interest or are employees." ( Suh v. Superior Court (2010) 181 Cal.App.4th 1504, 1513, 105 Cal.Rptr.3d 585 ( Suh ).) More specifically, as a general rule, "[t]he right to arbitration depends on a contract, and a party can be compelled to submit a dispute to arbitration only if the party has agreed in writing to do so." ( Matthau v. Superior Court (2007) 151 Cal.App.4th 593, 598, 60 Cal.Rptr.3d 93 ( Matthau ).) "Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement." ( County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 245, 54 Cal.Rptr.2d 628 ( Contra Costa ).)

Nevertheless, there are circumstances under which persons who have not signed an agreement to arbitrate are bound to do so. One treatise has stated that there are "six theories by which a nonsignatory may be bound to arbitrate: ‘(a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing or alter ego; (e) estoppel; and (f) third-party beneficiary.’ " ( Suh, supra , 181 Cal.App.4th at p. 1513, 105 Cal.Rptr.3d 585 [quoting 2 Oehmke, Commercial Arbitration (3d ed. 2006 update) § 41.57 at pp. 41-195]; see 1 Oehmke, Commercial Arbitration (3d ed. Aug. 2017 update) § 8.1 [similar].) "The California cases binding nonsignatories to arbitrate their claims fall into two categories. In some cases, a nonsignatory was required to arbitrate a claim because a benefit was conferred on the nonsignatory as a result of the contract, making the nonsignatory a third party beneficiary of the arbitration agreement. In other cases, the nonsignatory was bound to arbitrate the dispute because a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to also be bound to arbitrate his or her claim." ( Contra Costa, supra , 47 Cal.App.4th at p. 242, 54 Cal.Rptr.2d 628.)

The parties have not cited to, nor have we discovered, any authority addressing precisely analogous circumstances, that is, an attempt to enforce an arbitration clause in an equipment rental agreement against the nonsignatory employee of the party that rented the equipment. UHCA, citing to general principles and cases that it contends are analogous, argues that plaintiffs are bound to arbitrate their claims, even though they are not signatories to the agreement between Mr. Scannell and UHCA, on any of three theories: third-party beneficiary, agency, or estoppel. We are not persuaded.

1. Third-party Beneficiary.

UHCA contends that Mr. Jensen is a third party beneficiary of the contract between UHCA and Mr. Scannell. "A third party beneficiary is someone who may enforce a contract because the contract is made expressly for his benefit." ( Matthau , supra , 151 Cal.App.4th at p. 602, 60 Cal.Rptr.3d 93.) " ‘ "The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract." ’ " ( Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 967, 134 Cal.Rptr.3d 39 ( Cargill ).) " ‘[W]here ... the issue [of whether a third party is an intended beneficiary] can be answered by interpreting the contract as a whole and doing so in light of the uncontradicted evidence of the circumstances and negotiations of the parties in making the contract, the issue becomes one of law that we resolve independently.’ " ( Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891, 38 Cal.Rptr.3d 78.)

Mr. Jensen is not a third-party beneficiary of the contract between Mr. Scannell and UHCA. The rental agreement at issue contemplates the possibility that Mr. Scannell might authorize someone other than himself to use the truck. Nothing in the terms of the agreement, however, demonstrates any express intent to benefit a third party—whether Mr. Jensen specifically, or Mr. Scannell's employees generally—on the part of either Mr. Scannell or UHCA. (See Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal.App.4th 775, 790, 43 Cal.Rptr.2d 650 [sublessee of equipment not a third party beneficiary of contract for lease of equipment, because final contract between lessee and lessor did not mention sublessee].)

In its briefing on appeal, UHCA points to the undisputed fact that "Mr. Scannell rented the U-Haul Truck so that Mr. Jensen could transport CTS's products ...." It is doubtful, however, that this circumstance describes a benefit to Mr. Jensen; he drove the truck not for his own benefit, but for the benefit of CTS. UHCA has not cited, and we have not discovered, any case in which an employee has...