Ghazzal v. Mercedes-Benz USA, LLC

Opinion

----oo0oo---- AFSHEEN AHMED GHAZZAL FKA No. 2:24-cv-02163 WBS SCR AFSHEEN AHMED, an individual, and ISRAAIL AHMED GHAZZAL FKA DEJON SMITH, an individual, ORDER RE: DEFENDANT’S MOTION Plaintiffs, TO COMPEL ARBITRATION v. MERCEDES-BENZ USA, LLC, a Delaware Limited Liability Company, and DOES 1 through 10, inclusive, Defendants. ----oo0oo---- Plaintiffs Afsheen Ahmed Ghazzal and Israail Ahmed Ghazzal (collectively, “plaintiffs”) filed this action in Sacramento County Superior Court on July 12, 2024, bringing breach of express and implied warranty claims under California’s Song-Beverly Act, Cal. Civ. Code § 1793.2(d)(2). (Docket No. 1- 1.) Defendant Mercedes-Benz USA, LLC (“defendant”) removed to this court on the basis of diversity. (Docket No. 1.) Defendant moves to compel the arbitration of both claims. (Docket No. 11.) Plaintiffs allege that they leased a defective vehicle of defendant’s make from non-party dealership Mercedes Benz of Rocklin on October 14, 2023. (Declaration of Luis A. Serrano ¶¶ 3-4 (Docket No. 12-1).) The lease’s “parties” clause lists plaintiffs and the dealership, but it omits defendant. (Id. at 2.) At issue is whether defendant may enforce the lease’s arbitration clause as a non-signatory third-party beneficiary. The arbitration clause states that

Any claim or dispute, whether in contract, tort, or otherwise (including any dispute over the interpretation, scope, or validity of this lease, arbitration section or the arbitrability of any issue), between you and . . . the vehicle distributor, including Mercedes-Benz USA LLC (each a “Third Party Beneficiary”), which arises out of or relates to a credit application, this lease, or any resulting transaction or relationship arising out of this lease (including any such relationship with third parties who do not sign this contract) shall, at the election of either you, us, or a Third Party Beneficiary, be resolved by a neutral, binding arbitration and not by a court action. (Docket No. 1-2 at 8 (capitalization altered).) “State law determines whether a non-signatory to an agreement containing an arbitration clause may compel arbitration.” Ngo v. BMW of N. Am., LLC, 23 F.4th 942, 946 (9th Cir. 2022). Under California law, a non-signatory to a contract containing an arbitration clause may compel arbitration as a third-party beneficiary when it shows that “express provisions of the contract” and the “relevant circumstances” satisfy three factors: (1) “the third party would in fact benefit from the contract,” (2) “a motivating purpose of the contracting parties was to provide a benefit to the third party,” and (3) “permitting the third party to enforce the contract ‘is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.’” Id. (quoting Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 830 (2019)). Under this test, defendant may enforce the lease’s arbitration clause as a third-party beneficiary. The arbitration clause benefits defendant by providing its preferred forum for resolving the instant dispute. The plain text of the arbitration clause also clarifies that the signatories intended to benefit defendant by stating that it applied to any dispute between the lessee and “the vehicle distributor, including Mercedes-Benz USA LLC (each a ‘Third Party Beneficiary’).” See Hicks v. Utiliquest, LLC, 736 F. Supp. 3d 849, 860-61 (E.D. Cal. 2024) (Calabretta, J.) (granting third-party beneficiary’s motion to compel arbitration on the same grounds). On its own terms, the lease is clear that the parties contemplated defendant’s enforcement of the arbitration clause, even though defendant was not a party to the lease. Further, the instant matter is a “dispute . . . which arises out of or relates to . . . this lease, or any resulting transaction or relationship arising out of this lease (including any such relationship with third parties who do not sign this contract).” (Docket No. 1-2 at 8.) Because plaintiffs leased the vehicle at issue, which defendant made or distributed, they now assert their Song-Beverly Act claim against defendant. Thus, the dispute arises out of the lease and is therefore subject to the lease’s arbitration clause. In each case plaintiffs cite in opposition, the panel IE OIE IER IIR IRE III IIE EEE IDE IEEE I I

found that the arbitration clause at issue did not make express reference to the defendant manufacturer. See, e.g., Montemayor v. Ford Motor Co., 92 Cal. App. 5th 958, 972-74 (2nd Dist.), review granted, 535 P.3d 1 (Cal. 2023); Ford Motor Warranty Cases, 89 Cal. App. 5th 1324, 1336-40 (2nd Dist.), review granted, 532 P.3d 270 (Cal. 2023). Both are distinguishable because the arbitration clause here expressly names defendant as a third-party beneficiary and gives it the explicit right to compel binding arbitration. (Docket No. 1-2 at 8.) IT IS THEREFORE ORDERED that defendant’s motion to compel arbitration (Docket No. 11) be, and the same hereby is, IT IS FURTHER ORDERED that this case is STAYED pending arbitration. The Clerk shall close this file administratively, subject to it being reopened upon the application of either party after arbitration has been fully completed. Dated: February 4, 2025 dete, . ak 2 UNITED STATES DISTRICT JUDGE