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determining that although Defendant "is an incidental beneficiary of an agreement between a dealership and buyer to purchase a BMW vehicle," the agreement did "not reflect the express or implied intent of the parties to benefit BMW"
Summary of this case from Safley v. BMW of N. Am., LLCOpinion
Case No.: 19cv706 JM (BGS)
2020-02-27
Frederick J. JUROSKY, Plaintiff, v. BMW OF NORTH AMERICA, LLC, Defendant.
Christine J. Haw, Gregory Sogoyan, Tionna Dolin, Caitlin Scott, Kyle Raine Tracy, Payam Shahian, Strategic Legal Practices, APC, Michael Harris Rosenstein, Law Offices of Micheal H. Rosenstein, LC, Los Angeles, CA, Dara Tabesh, EcoTech Law Group, P.C., San Francisco, CA, for Plaintiff. Garrick Y. Chan, Molly Moriarty Lane, Morgan, Lewis & Bockius, San Francisco, CA, Shelby Kathryn Kroeger, Dinsmore & Shohl, LLP, San Diego, CA, for Defendant.
Christine J. Haw, Gregory Sogoyan, Tionna Dolin, Caitlin Scott, Kyle Raine Tracy, Payam Shahian, Strategic Legal Practices, APC, Michael Harris Rosenstein, Law Offices of Micheal H. Rosenstein, LC, Los Angeles, CA, Dara Tabesh, EcoTech Law Group, P.C., San Francisco, CA, for Plaintiff.
Garrick Y. Chan, Molly Moriarty Lane, Morgan, Lewis & Bockius, San Francisco, CA, Shelby Kathryn Kroeger, Dinsmore & Shohl, LLP, San Diego, CA, for Defendant.
ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION AND STAY ALL PROCEEDINGS
JEFFREY T. MILLER, United States District Judge
Defendant BMW of North America, LLC ("BMW") moves for an order compelling Plaintiff Frederick J. Jurosky ("Plaintiff") to arbitrate his claims related to alleged defects in a BMW vehicle. (Doc. No. 16.) BMW also requests a stay of all proceedings pending completion of the arbitration. The motion has been briefed and the court finds it suitable for submission without oral argument in accordance with Civil Local Rule 7.1(d)(1). For the below reasons, the motion is DENIED.
I. BACKGROUND
On March 5, 2013, Plaintiff purchased a used 2010 BMW ("the vehicle") from Bob Smith BMW ("the dealership"). The purchase agreement between Plaintiff and the dealership contained an arbitration clause. Plaintiff received an express written warranty from BMW. During the warranty period, the vehicle's engine allegedly contained or developed defects and BMW declined to replace the vehicle or provide restitution.
On July 17, 2018, Plaintiff filed a complaint in the California Superior Court for the County of Sacramento against BMW and the dealership alleging violations of the Song-Beverly Consumer Warranty Act, CAL. CIV. CODE §§ 1790 -90.4. On November 6, 2018, the case was transferred to the County of San Diego. On April 15, 2019, Plaintiff dismissed the dealership as a defendant. On April 17, 2019, BMW filed an answer and removed the case to federal court based on diversity jurisdiction.
On September 18, 2019, BMW filed the instant motion to compel arbitration. Plaintiff also filed a request for judicial notice of the purchase agreement, (Doc. No. 17 at 9-10), and a January 30, 2019 order by San Diego Superior Court Judge Randa Trapp granting the dealership's motion to compel arbitration, (id. at 12-13). On October 7, 2019, Plaintiff responded in opposition. (Doc. No. 19.) BMW replied on October 11, 2019. (Doc. No. 20.) BMW also filed a request for judicial notice of two district court orders granting other motions to compel arbitration by BMW. (Doc. No. 20-1.) On October 14, 2019, Plaintiff provided a notice of supplemental authority consisting of an October 11, 2019 district court order denying a motion to compel arbitration by BMW. (Doc. No. 22.) On October 15, 2019, BMW filed its third request for judicial notice, this time of a September 10, 2019 district court order granting a motion to compel arbitration. (Doc. No. 23.) On November 5, 2019, Plaintiff filed a "supplemental" request for judicial notice of several additional district court filings, including the purchase agreements from two other cases cited in the parties' filings. (Doc. No. 28.)
II. LEGAL STANDARD
The Federal Arbitration Act (FAA) allows "a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States District Court .... for an order directing that .... arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. The FAA promotes a general policy favoring arbitration agreements. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ; see also Hall Street Assoc., L.L.C. v. Mattel, Inc. , 552 U.S. 576, 581, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). The FAA thus "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds Inc. v. Byrd , 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).
"[A]n agreement to arbitrate is a matter of contract." Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000). When a party seeks an order compelling arbitration, interpreting the parties' intent on certain issues in the agreement remains "within the province of judicial review." Momot v. Mastro , 652 F.3d 982, 987 (9th Cir. 2011). Arbitration "is a way to resolve those disputes – but only those disputes – the parties have agreed to submit to arbitration." Id. (citing First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). "[A] party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." United Steelworkers v. Warrior & Gulf Navigation Co. , 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). The party seeking to compel arbitration bears the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence. Norcia v. Samsung Telecoms. Am., LLC , 845 F.3d 1279, 1283 (9th Cir. 2017) (citing Knutson v. Sirius XM Radio Inc. , 771 F.3d 559, 565 (9th Cir. 2014) ).
III. DISCUSSION
The parties dispute whether BMW, as a nonsignatory to the purchase agreement containing the arbitration clause, can compel Plaintiff to arbitrate his claims. BMW contends that the question of whether it has standing to compel arbitration is one of arbitrability that must be decided by an arbitrator. BMW also argues it may compel arbitration under a theory of equitable estoppel or as a third party beneficiary. In addition to opposing these arguments, Plaintiff argues that BMW waived its right to compel arbitration.
A. Arbitrability
BMW first argues that the question of whether it can compel arbitration must be answered by an arbitrator, not a court, because the arbitration clause states that questions of arbitrability shall be decided by an arbitrator. (Doc. No. 16 at 10-11, 15-16.) The purchase agreement, which is signed by Plaintiff and the dealership, but not BMW, states:
Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to .... purchase or condition of this vehicle, the contact 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.
The court takes judicial notice of the agreement between Plaintiff and the dealership. (Doc. No. 17 at 8-10.) The agreement is attached as an exhibit to a state court record subject to judicial notice. See U.S. v. Wilson , 631 F.2d 118, 119 (9th Cir. 1980). The requests by both parties for judicial notice of various court documents and decisions referenced in this order are GRANTED. The remaining requests for judicial notice of documents not referenced in this order are DENIED.
The issue of arbitrability is for the court to decide unless the parties' agreement clearly and unmistakably provides otherwise. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002). In Kramer v. Toyota Motor Corp. , 705 F.3d 1122, 1126-27 (9th Cir. 2013), cert. denied , 571 U.S. 818, 134 S.Ct. 62, 187 L.Ed.2d 26 (2013), the Ninth Circuit addressed whether a defendant manufacturer could compel a group of buyer plaintiffs to arbitrate based on purchase agreements that were signed by the plaintiffs and their respective dealerships, but not the manufacturer. The dealerships were not parties to the lawsuit. Id. at 1127. The manufacturer argued that because the purchase agreements provided that arbitrators shall decide issues of interpretation, scope, and applicability of the arbitration clauses, the arbitrators should decide the issue of arbitrability. Id. The court held that the district court could decide issues of arbitrability because the "you and us" language in the arbitration clauses evidenced the plaintiffs' intent to arbitrate disputes with the dealerships, but not the manufacturer. Id. at 1128. The court stated, "[i]n the absence of a disagreement between Plaintiffs and the Dealerships, the agreement to arbitrate arbitrability does not apply." Id. Therefore, the court also stated, "[g]iven the absence of clear and unmistakable evidence that Plaintiffs agreed to arbitrate arbitrability with nonsignatories, the district court had the authority to decide whether the instant dispute [was] arbitrable." Id. at 1127 ; see also Mundi v. Union Sec. Life Ins. Co. , 555 F.3d 1042, 1045 (9th Cir. 2009) (finding a nonsignatory defendant could not compel arbitration in the absence of language in the arbitration clause stating otherwise); Kim v. BMW of N. Am., LLC , 408 F. Supp. 3d 1155, 1158 (C.D. Cal. 2019) (finding that whether BMW, as a nonsignatory, can be bound by an arbitration clause "is not a question for the arbitrator"); Roth v. Jaguar Land Rover N. Am., LLC , No. 17cv1522 AGD (FM), 2017 WL 10545074, at *4 (C.D. Cal. Dec. 4, 2017) ("Determining if Plaintiff's claims against a nonsignatory defendant should be arbitrated doesn't depend on the scope of the arbitration agreement, and it is properly within a district court's authority.").
The arbitration clause here contains the same "you and us" language the court in Kramer found to include only the buyer and dealership, and not the manufacturer. See also Vincent v. BMW of N. Am., LLC , No. 19cv6439 AS, 2019 WL 8013093, at *4 (C.D. Cal. Nov. 26, 2019) (finding the same issue to be arbitrable based on the same language in the arbitration clause). As discussed below, BMW's various arguments attempting to distinguish Kramer are not persuasive. Because no dispute currently exists between Plaintiff and the dealership, and because there is no clear and unmistakable evidence indicating otherwise, the issue of whether the instant dispute is arbitrable given BMW's status as a nonsignatory need not be decided by an arbitrator. See In re Midland Credit Mgmt., Inc. Tel. Consumer Prot. Litig. , No. 11md2286 MMA (MDD), 2019 WL 398169, at *6 (S.D. Cal. Jan. 31, 2019) ("[A] delegation clause granting authority to an arbitrator to decide issues of application, enforceability, or interpretation are only applicable to the parties of the agreement."), reconsideration denied , 2019 WL 1676015 (S.D. Cal. Apr. 17, 2019).
B. Equitable Estoppel
BMW argues it may compel arbitration based on a theory of equitable estoppel. "[A] litigant who is not a party to an arbitration agreement may invoke arbitration under the FAA if the relevant state contract law allows the litigant to enforce the agreement." Kramer , 705 F.3d at 1128 (citing Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 632, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) ); see also Mundi , 555 F.3d at 1045 ("General contract and agency principles apply in determining the enforcement of an arbitration agreement by or against nonsignatories."). "Equitable estoppel precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes." Comer v. Micor, Inc. , 436 F.3d 1098, 1101 (9th Cir. 2006).
In Kramer , the Ninth Circuit articulated the following standard for determining whether a nonsignatory may compel arbitration under California law:
Where a nonsignatory seeks to enforce an arbitration clause, the doctrine of equitable estoppel applies in two circumstances: (1) when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are intimately founded in and intertwined with the underlying contract, and (2) when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and the allegations of interdependent misconduct are founded in or intimately connected with the obligations of the underlying agreement.
705 F.3d at 1128-29 (9th Cir. 2013) (internal citations, alterations, and quotation marks omitted); see also Murphy v. DirecTV, Inc. , 724 F.3d 1218, 1229 (9th Cir. 2013) (referring to the rule of equitable estoppel in Kramer as "a controlling statement of California law"); Mundi , 555 F.3d at 1046 ("[I]n light of the general principle that only those who have agreed to arbitrate are obliged to do so, we see no basis for extending the concept of equitable estoppel of third parties in an arbitration context beyond the very narrow confines delineated in these two [circumstances]."). Courts have reached different conclusions as to whether both circumstances must be met in order for equitable estoppel to apply. Regardless, for the below reasons, neither circumstance applies. 1. Intimately Founded In and Intertwined With the Purchase Agreement
The court in Kramer did not specify whether these two "circumstances" were conjunctive or disjunctive. However, the court analyzed the second circumstance even though it found the first circumstance was not present. 705 F.3d at 1132-33. Some courts have treated these two circumstances as elements that must both be satisfied. See Lanning v. BMW of N. Am., LLC , No. 19cv773 BEN (LL), 2019 WL 5748518, at *2 (S.D. Cal. Nov. 5, 2019) ("[T]his test is conjunctive, not disjunctive."); Calzadillas v. Wonderful Co., LLC , No. 19cv172 DAD (JLT), 2019 WL 2339783, at *7 (E.D. Cal. June 3, 2019) ("Equitable estoppel only applies when both requirements are satisfied, a point confirmed by the California Court of Appeal [in] Goldman [.]"); Goldman v. KPMG, LLP , 173 Cal. App. 4th 209, 219, 92 Cal.Rptr.3d 534 (2009) ("[A]llegations of substantially interdependent and concerted misconduct by signatories and nonsignatories, standing alone, are not enough: the allegations of interdependent misconduct must be founded in or intimately connected with the obligations of the underlying agreement."). Other courts have found the presence of either circumstance to be sufficient. See, e.g. , Franklin v. Cmty. Reg'l Med. Ctr. , No. 19cv709 SKO, 2019 WL 6701298, at *4 (E.D. Cal. Dec. 9, 2019) ; Davis v. Einstein Noah Rest. Grp., Inc. , No. 19cv771 JSW, 2019 WL 6835717, at *4 (N.D. Cal. Oct. 23, 2019) ; Roberts v. Obelisk, Inc. , No. 18cv2898 LAB (BGS), 2019 WL 1902605, at *7 (S.D. Cal. Apr. 29, 2019). Because neither circumstance is present here, the court declines to decide the issue of whether the test is conjunctive or disjunctive.
The first circumstance from Kramer is not present because Plaintiff's claims do not rely on the purchase agreement and are not intimately founded in and intertwined with the purchase agreement. Plaintiff's complaint contains five causes of action under the Song-Beverly Act, including: (1) failure to promptly replace the vehicle or make restitution; (2) failure to commence repairs within a reasonable time; (3) failure to make available to its authorized service and repair facilities sufficient service literature and replacement parts to effect repairs; (4) breach of an express written warranty; and (5) breach of the implied warranty of merchantability. (Doc. No. 1-7 at 4-9.) In addition, Plaintiff includes one count of common law fraudulent concealment. (Id. at 9-15.)
While all of Plaintiff's claims expressly reference BMW's warranties, none of them reference the purchase agreement. See Kramer , 705 F.3d at 1132 (relying on the fact that plaintiff's claims did not reference the purchase agreement); Calzadillas , 2019 WL 2339783, at *7 (same). Even if Plaintiff's complaint referenced the purchase agreement, in order to be intertwined with the purchase agreement, Plaintiff must allege a violation of a "duty, obligation, term or condition" imposed by the purchase agreement. In re Henson , 869 F.3d 1052, 1060 (9th Cir. 2017) (citing Goldman , 173 Cal. App. 4th 209, 92 Cal.Rptr.3d 534 ); R. E. v. Pac. Fertility Ctr. , No. 18cv1586 JSC, 2019 WL 1331044, at *5 (N.D. Cal. Mar. 25, 2019) ; Stiner v. Brookdale Senior Living, Inc. , 354 F. Supp. 3d 1046, 1056 (N.D. Cal. 2019) (relying on the fact that plaintiff's claims did not reference or rely "solely" on the contract containing the arbitration clause), motion to certify appeal denied , 383 F. Supp. 3d 949 (N.D. Cal. 2019). In his complaint, Plaintiff alleges no duty, obligation, term, or condition imposed by the purchase agreement that BMW breached.
Moreover, although Plaintiff's claims depend on BMW's warranties, the purchase agreement expressly differentiates BMW's warranty from the dealership's warranties. (Doc. Nos. 16 at 17.) Specifically, the purchase agreement contains a provision in which the dealership disclaims all warranties, and states "[t]his provision does not affect any warranties covering the vehicle that the vehicle manufacturer may provide." (Doc. No. 17 at 10.) This differentiation does not support the interrelatedness of the dealership's purchase agreement and BMW's warranties. Instead, it demonstrates an intent to distinguish and distance the dealership's purchase agreement from any warranty that BMW "may" provide. See Kramer , 705 F.3d at 1131 (relying on the same reasoning). Accordingly, Plaintiff's claims do not rely on the purchase agreement, and they are not intimately found in or intertwined with, the purchase agreement containing the arbitration clause.
The dealership disclaimed all warranties unless the dealership entered into a service contract, provided its own warranty, or sold a "certified" used vehicle. (Doc. No. 17 at 10.) None of these facts are alleged here.
2. Interdependent and Concerted Misconduct Founded In or Intimately Connected With the Obligations of the Underlying Agreement
The second circumstance in Kramer is also not present because Plaintiff does not allege substantially interdependent and concerted misconduct by BMW and another signatory. 705 F.3d at 1131 ("The doctrine of equitable estoppel applies where a signatory raises allegations of substantially interdependent and concerted misconduct by both a nonsignatory and a signatory.") (emphasis added). Although the dealership was initially included as a defendant, the dealership was dismissed prior to the case being removed to federal court. (See Doc. No. 1-8.) The only remaining defendant is BMW. Therefore, there are no allegations of interdependent misconduct or claims against a signatory that are based on the same facts and are inherently inseparable from claims against a nonsignatory. Other courts have found that where no claim or allegation is made against the nonsignatory in a complaint, the second circumstance in Kramer does not apply. See Franklin , 2019 WL 6701298, at *4 ; Lucas v. Hertz Corp. , 875 F. Supp. 2d 991, 1003 (N.D. Cal. 2012).
Even if Plaintiff's complaint initially contained allegations of collusion or interdependent misconduct between the dealership and BMW, "California state contract law does not allow a nonsignatory to enforce an arbitration agreement based upon a mere allegation of collusion or interdependent misconduct between a signatory and nonsignatory." Kramer , 705 F.3d at 1132-33. Rather, " ‘the allegations of interdependent misconduct must be founded in or intimately connected with the obligations of the underlying agreement.’ " Id. at 1133 (quoting Goldman , 173 Cal. App. 4th at 219, 92 Cal.Rptr.3d 534 ). To the extent Plaintiff still alleges that both BMW and the dealership coordinated to violate his rights under the Song-Beverly Act, or to conceal defects in the vehicle, this allegation does not rely on the purchase agreement for the same reasons as discussed above.
Finally, in cases involving claims under the Song-Beverly Act, other courts have found that a nonsignatory manufacturer could not enforce an arbitration clause contained in the purchase agreement between the buyer and dealership. In Kim , the court found that Song-Beverly Act claims, as well as claims for breach of an express written warranty, breach of the implied warranty of merchantability, and fraud, did not rely on the purchase agreement. 408 F. Supp. 3d at 1157. The district court in Roth came to the same conclusion in a case where the dealership was a party to the action. 2017 WL 10545074, at *5. Overall, as was the case in Kramer , Plaintiff does not "simultaneously invoke the duties and obligations of [BMW] under the Purchase Agreement, as it has none, while seeking to avoid arbitration. Thus, the inequities that the doctrine of equitable estoppel is designed to address are not present." Id. at 1134. Based on the above, BMW did not show by a preponderance of evidence that it can compel arbitration based on a theory of equitable estoppel.
3. BMW's Arguments
BMW argues that equitable estoppel applies based on the relationship between its warranty and the dealership's purchase agreement. BMW also argues that Kramer is distinguishable and the court should disregard it. For the below reasons, BMW's arguments are unpersuasive.
i. Reliance of the Warranty on the Purchase Agreement
BMW argues that Plaintiff's claims rely on the purchase agreement, and equitable estoppel therefore applies, because "without the purchase agreement, there is no warranty, and without the warranty, there are no claims." (Doc. No. 16 at 19.) In Kramer , however, the court rejected the same or similar reasoning. 705 F.3d at 1132 (finding reliance on the "existence" of a vehicle purchase insufficient to show reliance of the claims on the purchase agreement); see also Murphy , 724 F.3d at 1230 (noting that in Kramer "[w]e expressly rejected Toyota's argument that the plaintiffs' claims were necessarily intertwined with the Purchase Agreements merely because the lawsuit was predicated on the bare fact that a vehicle purchase occurred").
As set forth in Kramer , the correct analysis is whether Plaintiffs would have a claim independent of the existence of the purchase agreement. Id. at 1131. Although BMW might not have provided an express written warranty without the purchase of the vehicle, and although Plaintiff's claims are dependent on the existence of BMW's warranties, Plaintiff's claims are still independent of the particular purchase agreement at issue. BMW does not argue, for example, that BMW's warranties would be unenforceable, or that Plaintiff's claims would be invalid, if the dealership had transferred ownership of the vehicle without the execution of the purchase agreement. See STM Atl. N.V. v. Dong Yin Dev. Holdings Ltd. , No. 18cv1269 JLS (JCG), 2019 WL 2417625, at *4 (C.D. Cal. Feb. 15, 2019) (noting that claims could have been brought even if the plaintiffs had never signed the agreement containing the arbitration clause); Stiner , 354 F. Supp. 3d at 1056 (relying on the fact that plaintiff's claims did not rely on the validity and enforceability of the underlying agreements); Roberts , 2019 WL 1902605, at *7 (finding the plaintiff's claims were not interrelated with the underlying agreement because nothing about the claims would require the trier of fact to "wade through" the agreement). Moreover, as noted above, the independence of BMW's warranty is demonstrated by the fact that the purchase agreement does not require BMW to provide any warranty. (See Doc. No. 17 at 10 (the manufacturer "may provide" a warranty).)
ii. Song-Beverly Act Claims
BMW next argues that Kramer is distinguishable from the instant case because it did not involve a claim for breach of an express warranty under the Song-Beverly Act. (Doc. No. 20 at 6.) Although Kramer did not involve claims under the Song-Beverly Act, both cases are based on alleged vehicle defects and involve consumer protection statutes. See Roth , 2017 WL 10545074, at *5 (finding "compelling" similarities with Kramer based, in part, on the fact that both cases involved claims based on the manufacturer's statutory duties owed to end-buyers). Moreover, as discussed above, the reasoning in Kramer is just as persuasive, if not more so, when applied to Plaintiff's claims given that Plaintiff's claims rely on BMW's warranty, which the parties explicitly agreed is independent from the purchase agreement. BMW nonetheless argues that Plaintiff's claims rely on the purchase agreement because, under the Song-Beverly Act, Plaintiff must prove he is a "purchaser" who bought the vehicle from a "retail seller." (Doc. No. 19 at 6.) The statutory and common law claims in Kramer , however, would also necessarily rely on proving the same or similar facts. Also, BMW does not argue, at least not convincingly, that the only way for Plaintiff to satisfy the "purchaser" and "retail seller" elements of his Song-Beverly Act claims is by relying on the purchase agreement, or that BMW could seriously dispute that Plaintiff is a "purchaser" or that the dealership is a "retail seller." Lastly, at least three district courts have found, under Kramer , that claims alleging Song-Beverly Act violations were not sufficiently related to the underlying purchase agreement to allow a nonsignatory manufacturer, including BMW, to enforce the agreement's arbitration clause. See Vincent , 2019 WL 8013093, at *8 ; Kim , 408 F. Supp. 3d at 1160 ; Roth , 2017 WL 10545074, at *5. iii. Broader Language
BMW also argues that Kramer is distinguishable because the arbitration clause here contains language referring to "third parties" and the vehicle's "condition" that is not present in Kramer. (See Doc. No. 16 at 6-7.) In support of this argument, BMW states:
[T]he language of the arbitration provision in Plaintiff's Purchase Agreement is broader than the language at issue in Kramer. Specifically, Plaintiff's arbitration provision contemplates inclusion of any dispute that "arises out of .... [the] 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)." The Kramer arbitration provision, on the other hand, simply stated that "all claims and disputes arising out of, or relating to: the vehicle, your credit application, this contract, the sale or financing of the vehicle, and any collection activities" were covered, but did not indicate that "any resulting transactions or relationship (including any such relationship with third parties who do not sign this contract)" would also be encompassed by the provision. Finally, Kramer is also distinguishable because the arbitration provision in the Purchase Agreement also requires arbitration of any claims relating to the "condition" of the vehicle whereas Kramer did not include this language.
(Id. (internal citations omitted).)
Kramer involved five plaintiffs and "several" purchase agreements that were executed in three different states. 705 F.3d at 1124. One of the agreements did not include an arbitration clause. Id. at n.1. Accordingly, the record of the lower court in Kramer contains four purchase agreements with arbitration clauses. See Motion to Compel Arbitration, In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Practices & Prod. Liab. Litig. , No. 10ml2172 CJC (RNB) (C.D. Cal. Oct. 10, 2011), Doc. No. 133, Exhibits A-D. Two of the four purchase agreements contain the exact same language that BMW claims distinguishes the present case from Kramer , i.e. reference to the "condition of this vehicle" and "any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract)." See id. (Exhibits A-B). Both of these agreements were signed by dealerships in California. See id. The other two agreements do not contain this language and were signed by dealerships in Texas. See id. (Exhibits C-D).
Rather than recite the language from all four arbitration clauses, the court in Kramer relied on only one of the agreements – the one signed by plaintiff Scholten – which did not include language concerning the condition of the vehicle or relationships with third parties. 705 F.3d at 1124. The court, however, repeatedly referred to the Scholten agreement as an "example" of the four agreements at issue, and the court specifically noted that all the agreements "contained similarly worded arbitration provisions." Id. at 1124. Certainly, the Kramer court's unwillingness to distinguish between those agreements containing the language concerning the condition of the vehicle and relationships with third parties, and those that did not, does not suggest the difference in language warrants a distinction. Regardless, when read in context, the language plainly does not give BMW the right to compel arbitration. Rather, the language refers to types of disputes between Plaintiff and the dealership that may be arbitrated by Plaintiff or the dealership. As noted by Plaintiff, at least one court has interpreted the language concerning third parties to refer to a secondary sale of the vehicle. See Soto v. Am. Honda Motor Co. , 946 F. Supp. 2d 949, 955 (N.D. Cal. 2012). Therefore, BMW's representation that the language in the instant arbitration clause is "broader than the language at issue in Kramer " is, at best, incorrect. BMW's decision to omit any reference to Kramer in its initial motion is also questionable.
On February 19, 2020, Plaintiff moved for sanctions against BMW under Rule 11 based on BMW's failure to cite Kramer in its motion and BMW's subsequent claim that Kramer was distinguishable based on the language in the arbitration clause. (Doc. No. 39-1.) In Plaintiff's November 5, 2019 "supplemental" request for judicial notice, however, Plaintiff also made representations concerning Kramer that were, at best, incorrect. (Doc. No. 28.) Specifically, Plaintiff repeatedly references "the" arbitration clause at issue in Kramer as if there was only one. (See, e.g. , id. at 7 ("[T]he arbitration clause in Kramer is identical to the ones here.").) Plaintiff therefore appears to commit the same infraction it accuses BMW of committing, i.e. cherry-picking from the multiple arbitration clauses at issue in Kramer. The court will, of course, reserve any decision as to sanctionable conduct until such time as Plaintiff's motion for sanctions is decided, should Plaintiff choose to pursue it in light of this order.
iv. Mance v. Mercedes-Benz
Finally, BMW urges the court to follow a non-binding district court case, Mance v. Mercedes-Benz USA , 901 F. Supp. 2d 1147 (N.D. Cal. 2012), instead of Kramer. In Mance , which was decided before Kramer , the court granted Mercedes-Benz's motion to compel arbitration as a matter of equitable estoppel because "it would not be fair to allow [the buyer plaintiff] to rely upon his signing the contract to buy the car and get the warranty but to prevent Mercedes-Benz from attempting to enforce the contract's arbitration clause." Id. at 1157. At least two district courts have adopted Mance's reasoning to grant BMW's motions to compel arbitration despite Kramer . See Lanning , 2019 WL 5748518, at *3 ("[A]bsent the purchase contract with the dealer, there would be no vehicle purchase, and absent that purchase, there would be no manufacturer's warranty."); Katz v. BMW of N. Am., LLC , No. 19cv1553 KAW, 2019 WL 4451014, at *3 (N.D. Cal. Sept. 17, 2019) ("With the dismissal of the signatory defendant (the Dealer) prior to removal, it would be unfair to permit Plaintiff to hold the nonsignatory defendant liable under the terms of the agreement's warranty while, at the same time, circumventing the contract's mandate to arbitrate."). In both cases, however, the court found BMW's warranty was "contained" in the agreement between the plaintiff and the dealership. See Lanning , 2019 WL 5748518, at *3 ; Katz , 2019 WL 4451014, at *4 (noting that the lease agreement specifically referenced the manufacturer's warranty). Furthermore, at least three district courts have found that Mance's reasoning was rejected in Kramer. See R. E. , 2019 WL 1331044, at *6 ; Amergence Supply Chain Mgmt. Inc. v. Changhong (Hong Kong) Trading Ltd. , No. 15cv9976 MWF (AFM), 2016 WL 8234652, at *9 (C.D. Cal. Apr. 21, 2016) (" Mance v. Mercedes-Benz USA is no longer good law[.]"); Soto v. Am. Honda Motor Co. , No. 12cv1377 SI, 2012 WL 5877476, at *3 (N.D. Cal. Nov. 20, 2012). Based on the above, the court agrees the Ninth Circuit's decision in Kramer rejected the district court's reasoning in Mance , and even if it did not, Mance is not sufficiently persuasive.
C. Third Party Beneficiary
In addition to its equitable estoppel theory, BMW argues that it may compel arbitration as a third party beneficiary. Under California law, 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." CAL. CIV. CODE § 1559. "It is well established that a nonsignatory beneficiary of an arbitration clause is entitled to require arbitration." Harris v. Superior Court , 188 Cal. App. 3d 475, 478, 233 Cal.Rptr. 186 (1986) (citations omitted). In order to compel arbitration as a third party beneficiary, the third party must show the contract reflects the express or implied intention of the parties to the contract to benefit the third party. Comer , 436 F.3d at 1102. The third party must be "more than incidentally benefitted by the contract." Gilbert Fin. Corp. v. Steelform Contracting Co. , 82 Cal. App. 3d 65, 70, 145 Cal.Rptr. 448 (1978).
In Kim , the district court addressed BMW's argument that it was a third party beneficiary based on the relationship between BMW's warranty and the purchase of the vehicle. 408 F. Supp. 3d at 1159. The court found that BMW was not a third party beneficiary even though the plaintiff signed a warranty form expressly incorporating the warranty into the contract. Id. The court reasoned that BMW was not benefitted by the warranty agreement, noting that manufacturers' warranties typically follow the vehicle even if it is resold. Id. The district court in Vincent came to the same conclusion regarding BMW's third party beneficiary status. 2019 WL 8013093, at *6 ("[BMW's] relationship with Plaintiff was formed by virtue of Plaintiff's purchase of the vehicle, not by virtue of any terms in the Purchase Agreement. [BMW] errs by conflating the two.").
The district court cases finding that automobile manufacturers were third-party beneficiaries are distinguishable. In Lanning , the dealership assigned the contract to a wholly-owned subsidiary of BMW. 2019 WL 5748518, at *4. In Fikhman v. BMW of N. Am. LLC , the arbitration clause covered "affiliates" and the lease agreement was assigned to a financial services company that BMW managed. No. 19cv3963 VAP (MRW), 2019 WL 6721626, at *3 (C.D. Cal. Oct. 15, 2019). Additionally, both cases relied on Mance , which multiple courts have found invalid.
While BMW is an incidental beneficiary of an agreement between a dealership and buyer to purchase a BMW vehicle, the purchase agreement here does not reflect the express or implied intent of the parties to benefit BMW. The only language cited by BMW in support of its third party beneficiary status is the language concerning the condition of the vehicle and relationships with third parties. (Doc. No. 16 at 17.) As discussed above, this language refers to types of disputes between Plaintiff and the dealership that may be arbitrated, and does not demonstrate an intent to confer some direct benefit on BMW. See Johnson v. Nissan N. Am., Inc. , No. 17cv517 WHO, 2018 WL 6803741, at *5 (N.D. Cal. Sept. 14, 2018) ("The single broad reference to ‘any third party’ illustrates the Dealership's lack of intention to benefit the manufacturer specifically[.]"). BMW does not explain, and cites no language in the purchase agreement explaining, its business relationship with the dealership or how it benefits from the dealership's sale. Moreover, if it had been the intent of the parties – or at the option of the dealership – to have BMW included under the arbitration language, this could have been expressly referenced in the "you and us" clause or the "third parties" clause of the purchase agreement. No such intention is apparent. Accordingly, BMW has not shown by a preponderance of the evidence that it is a third party beneficiary that may compel arbitration.
D. Waiver
As an alternative reason to deny BMW's motion, Plaintiff argues BMW waived its right to compel arbitration. (Doc. No. 19 at 22-24.) The issue of waiver by litigation conduct "is presumptively for a court and not an arbitrator to decide." Martin v. Yasuda , 829 F.3d 1118, 1123 (9th Cir. 2016) (citing Howsam , 537 U.S. at 83, 123 S.Ct. 588 ). The court will not decide waiver, however, if the arbitration agreement contains clear and unmistakable language that the parties intended for an arbitrator decide whether waiver occurred. Id. at 1124 (citing Hong v. CJ CGV Am. Holdings, Inc. , 222 Cal. App. 4th 240, 258, 166 Cal.Rptr.3d 100 (2013) ); see also Newirth v. Aegis Senior Communities, LLC , 931 F.3d 935, 940 n.8 (9th Cir. 2019).
The instant arbitration clause provides that "[a]ny claim or dispute, whether in contract, tort, statute or otherwise (including .... the arbitrability of the claim or dispute) .... shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action." (Doc. No. 17 at 10.) This is not clear and unmistakable language that Plaintiff and the dealership intended to arbitrate waiver, or as discussed above, that Plaintiff and the dealership intended to allow BMW to compel arbitration. Given that BMW has no right to compel arbitration, however, it is not necessary to decide whether BMW waived that right.
The court notes, however, that BMW waited 14 months since the case was filed to seek to compel arbitration. During that period, BMW filed a demurrer in state court, (see Doc. No. 1-6), arguing that plaintiff failed to state a claim for fraud. See Newirth , 931 F.3d at 941 ("[A] party acts inconsistently with exercising the right to arbitrate when it (1) makes an intentional decision not to move to compel arbitration, and (2) actively litigates the merits of a case for a prolonged period of time in order to take advantage of being in court."); Martin , 829 F.3d at 1126 (finding that defendant engaged in conduct inconsistent with their right to arbitration by filing a motion to dismiss on a "key merits issue").
IV. CONCLUSION
For the foregoing reasons, BMW's Motion to Compel Arbitration and Stay All Proceedings is DENIED.