Mance v. Mercedes-Benz USA, CV 11–03717 LB.

• Citation: 901 F.Supp.2d 1147
• Decision Date: 28 September 2012
• Docket Number: No. CV 11–03717 LB.,CV 11–03717 LB.
• Court: U.S. District Court — Eastern District of California
• Parties: Demetrius MANCE, Plaintiff, v. MERCEDES–BENZ USA, Defendant.

901 F.Supp.2d 1147

Demetrius MANCE, Plaintiff,

v.MERCEDES–BENZ USA, Defendant.

No. CV 11–03717 LB.

United States District Court,

N.D. California,

San Francisco Division.

Sept. 28, 2012.

Larry Chae, Amanda Lee Gray, Brian Joseph Bickel, Brian Kelly Cline, The Bickel Law Firm Inc., San Diego, CA, for Plaintiff.

Jon David Universal, Universal, Shannon & Wheeler, LLP, Roseville, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION

LAUREL BEELER, United States Magistrate Judge.

I. INTRODUCTION

Plaintiff Demetrius Mance bought a new Mercedes–Benz automobile. As it turns out, the car had many problems, so, after numerous failed attempts to fix it, Mr. Mance sued Mercedes–Benz USA, LLC (“Mercedes–Benz”), the car's manufacturer, for violation of the Song–Beverly Consumer Warranty Act, Cal. Civ.Code §§ 1790, et seq., California's Lemon Law. Mercedes–Benz moved to compel Mr. Mance to arbitrate his claims pursuant to an arbitration clause found in the contract he signed when he purchased the car. For the reasons set forth below, the court finds the arbitration clause to be enforceable and, accordingly, GRANTS Mercedes–Benz's motion.¹

II. BACKGROUND

On or about October 25, 2008,² plaintiff Demetrius Mance, a California resident, bought a new 2008 Mercedes–Benz E350 from Mercedes–Benz of Sacramento (“Dealer”), a dealer of automobiles made by defendant Mercedes–Benz. Complaint, ECF No. 1 ¶ 5.³ To purchase the car, Mr. Mance was required to sign a Retail Installment Contract (hereafter, the “contract”). Motion, ECF No. 6 at 2; Universal Decl., ECF No. 7, Ex. A. Upon doing so, Mercedes–Benz expressly warranted, as Mr. Mance alleges, “to preserve or maintain the utility or performance of the subject vehicle.” Complaint, ECF No. 1 ¶ 8.

Mr. Mance alleges that the car has experienced numerous problems that are covered under the warranty. Id. ¶¶ 9–13. Despite its attempts, Mercedes–Benz has not been able to repair the car. Id. ¶ 10. Mr. Mance then filed the instant lawsuit against Mercedes–Benz for breach of an express warranty, an implied warranty of merchantability, and an implied warranty of fitness in violation of the Song–Beverly Consumer Warranty Act, Cal. Civ.Code §§ 1790, et seq., also known as California's Lemon Law. ⁴See Complaint, ECF No. 1.

Mercedes–Benz has now moved for an order compelling Mr. Mance to arbitrate his claim because the contract he signed contains an arbitration clause, which states in relevant part:

Any claim or dispute, whether in contract, tort, statute, or otherwise (including the interpretation and scope of the arbitration clause, and the arbitrability of the claim or dispute), between you and us ... 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....

... We will advance your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $2500, which may be reimbursed by decision of the arbitrator at the arbitrator's discretion.... The arbitrator's award shall be final and binding on all parties, except that in the event the arbitrator's award for a party is $0 or against a party is in excess of $100,000, ... that party may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel.... Any arbitration under this arbitration clause shall be governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and not by any state law concerning arbitration.

Motion, ECF No. 6, Ex. A. Mr. Mance opposed Mercedes–Benz's motion. Opposition, ECF No. 13. He argues that (a) Mercedes–Benz, as a non-signatory to the contract, lacks standing to enforce the arbitration clause found within it, and (b) the arbitration clause is unconscionable and, thus, unenforceable.

The court heard oral argument on the motion on October 20, 2011. At the hearing, the court and parties discussed the possibility of settlement, and with the parties' agreement, the court deferred ruling on Mercedes–Benz's motion until the parties engaged in limited discovery and attended mediation, and until after Mr. Mance's automobile could be inspected. 10/20/2011 Minute Order, ECF No. 16; 10/24/2012 Order, ECF No. 17; Stipulation, ECF No. 21. Mediation did not resolve the case, Certification of ADR Session, ECF No. 26, and the court discussed the case and Mercedes–Benz's motion again at a status conference on March 1, 2012. 3/1/2012 Minute Order, ECF No. 27. The parties expressed the possibility that a car inspection during the summer months might be helpful (to better examine the automobile's air conditioning system), so the court once again deferred ruling on Mercedes–Benz's motion. Id.; 3/2/2012 Order, ECF No. 28. The court again heard from the parties at a status conference on August 30, 2012, and the parties informed the court that the inspection of the automobile had been done. 8/30/2012 Minute Order, ECF No. 32.

III. LEGAL STANDARD

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of a contract.” 9 U.S.C. § 2. “Once the court has determined that an arbitration agreement relates to a transaction involving interstate commerce, thereby falling under the FAA, the court's only role is to determine whether a valid arbitration agreement exists and whether the scope of the dispute falls within that agreement.” Ramirez v. Cintas Corp., No. C 04–00281 JSW, 2005 WL 2894628, at *3 (N.D.Cal. Nov. 2, 2005) (citing 9 U.S.C. § 4; Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000)). If the court is satisfied “that the making of the arbitration agreement or the failure to comply with the agreement is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4.

The FAA reflects a “liberal federal policy favoring arbitration agreements.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Nonetheless, when a question arises as to whether “a particular party is bound by the arbitration agreement,” “the liberal federal policy regarding the scope of arbitrable issues is inapposite.” Comer v. Micor, Inc., 436 F.3d 1098, 1104 n. 11 (9th Cir.2006) (emphasis in original; citation omitted).

IV. DISCUSSION

A. Whether Mercedes–Benz May Enforce the Arbitration Clause

The FAA “imposes certain rules of fundamental importance, including the basic precept that arbitration ‘is a matter of consent, not coercion.’ ” Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 130 S.Ct. 1758, 1773, 176 L.Ed.2d 605 (2010) (quoting Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).⁵ “The right to compel arbitration stems from a contractual right,” which generally “may not be invoked by one who is not a party to the agreement and does not otherwise possess the right to compel arbitration.” Britton v. Co-op Banking Group, 4 F.3d 742, 744 (9th Cir.1993) (citation omitted).

“The courts have made clear, however, that an obligation to arbitrate does not attach only to those who have actually signed the agreement to arbitrate. In certain circumstances, a signatory can compel a nonsignatory to arbitrate. For example, a nonsignatory may be bound by an agreement to arbitrate under ordinary contract and agency principles, such as 1) incorporation by reference; 2) assumption; 3) agency; 4) veil-piercing/alter ego; and 5) estoppel.” Amisil Holdings Ltd. v. Clarium Capital Mgmt. LLC, 622 F.Supp.2d 825, 830 (N.D.Cal.2007) (quoting Comer, 436 F.3d at 1101) (adopting magistrate judge's report and recommendation).

“Conversely, in certain circumstances, a nonsignatory can compel a signatory to arbitrate. For instance, a nonsignatory can enforce an arbitration agreement as a third-party beneficiary. Also, a signatory can be compelled to arbitrate at the non-signatory's insistence under ‘an alternative estoppel theory’— i.e., ‘because of the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory's obligations and duties in the contract ... and [the fact that] the claims were intimately founded in and intertwined with the underlying contract obligations.’ ” Id. at 830–31 (quoting Thomson–CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 778 (2d Cir.1995) and citing Comer, 436 F.3d at 1101) (internal citations and quotation marks omitted). Indeed, “courts have generally found ... [that] arbitration is more likely to be attained when the party resisting arbitration is a signatory.” Amisil, 622 F.Supp.2d at 831 (citing CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir.2005); Merrill Lynch Investment Managers v. Optibase, Ltd., 337 F.3d 125, 131 (2d Cir.2003); Thomson–CSF, 64 F.3d at 779).

Here, the court is faced with the latter circumstance, as Mercedes–Benz, a nonsignatory to the contract, contends that Mr. Mance, a signatory, should be compelled to arbitrate his claim under an alternate estoppel theory.⁶ Two kinds of equitable estoppel may support a nonsignatory's right to compel arbitration: (1) when the signatory's claims against a nonsignatory arise out of the underlying contract; and (2) when the nonsignatory's conduct is intertwined with a signatory's conduct.

First,

equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the...