Jacqueline Phillips-Harris v. BMW of North America, LLC

CENTRAL DISTRICT OF CALIFORNIA

JS-6

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Present: The Honorable MICHAEL W. FITZGERALD, U.S. District Judge

Deputy Clerk: Court Reporter:

Rita Sanchez Not Reported

Attorneys Present for Plaintiff: Attorneys Present for Defendant:

None Present None Present

Proceedings (In Chambers): ORDER RE MOTION TO REMAND CASE [9];

MOTION TO COMPEL ARBITRATION [10]

Before the Court are two motions:

First, there is Plaintiff Jacqueline Phillips-Harris’ Motion to Remand (“Remand

Motion”), filed on March 23, 2020. (Docket No. 9). Defendant BMW of North

America, LLC (“BMW”) filed an Opposition on March 30, 2020. (Docket No. 13).

Plaintiff filed a Reply on April 6, 2020. (Docket No. 20).

Second, there is BMW’s Motion to Compel Arbitration (“Arbitration Motion”),

filed on March 23, 2020. (Docket No. 10). Plaintiff filed an Opposition on March 30,

2020. (Docket No. 15). BMW filed a Reply on April 6, 2020. (Docket No. 21).

The motions were noticed to be heard on April 20, 2020. The Court read and

considered the papers on the motions and deemed the matter appropriate for decision

without oral argument. See Fed. R. Civ. P. 78(b); Local Rule 7-15. Vacating the

hearing was further required by the Continuity of Operations Plan arising from the

COVID-19 emergency. The hearing was therefore VACATED and removed from the

Court’s calendar.

For the reasons discussed below, the Court rules as follows:

 The Remand Motion is DENIED. The Court has diversity jurisdiction

over this action. The Court also declines to order sanctions.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

 The Arbitration Motion is GRANTED. BMW is a third-party

beneficiary of the Lease Agreement between Plaintiff and Long Beach

BMW-Mini, and therefore may enforce the arbitration provision within

the Lease Agreement.

I. BACKGROUND

On February 11, 2020, Plaintiff commenced this action in Los Angeles County

Superior Court. (Notice of Removal (“NoR”) ¶ 1 (Docket No. 1); Complaint (Docket

No. 1-1)).

The Complaint contains the following allegations:

On or about April 15, 2018, Plaintiff leased a 2018 BMW X5 (“Vehicle” or

“Subject Vehicle”), which was manufactured, distributed, or sold by BMW.

(Complaint ¶ 6). In connection with the purchase, Plaintiff received an express written

warranty in which BMW undertook to preserve or maintain the utility or performance

of the Vehicle or to provide compensation if there was a failure in utility or

performance for a specified period of time. (Id. ¶ 7). During the warranty period, the

Vehicle contained or developed various defects, including problems with the brakes,

engine, restraint system, electrical system, powertrain, and air-conditioning. (Id. ¶ 8).

Plaintiff has rightfully rejected and/or justifiably revoked acceptance of the Vehicle

and has exercised a right to cancel the sale. (Id. ¶ 12).

Based in part on the above allegations, Plaintiff asserts six claims for relief

against BMW: (1) breach of implied warranty of merchantability, California Civil

Code § 1794; (2) breach of the implied warranty of fitness, California Civil Code

§ 1794; (3) sale of defective merchandise without disclosing defects, California

Business & Professions Code §§ 17531, 17535; (4) breach of express warranty,

California Civil Code § 1794; (5) failure to promptly repurchase product, California

Civil Code § 1793.2(D); and (6) failure to commence repairs within a reasonable time

and to complete them within 30 days, California Civil Code § 1794. (Id. ¶¶ 5-44).

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CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Plaintiff seeks her “entire purchase price” under California Civil Code §

1792(b)(1), or in the alternative, the diminution in value of the Vehicle resulting from

its defects. (Id. ¶ 12). Plaintiff additionally seeks civil penalties for each violation in

the amount of up to two times Plaintiff’s total damages, restitution, consequential and

incidental damages, and attorneys’ fees. (Id. at 9, Prayer A-K).

On March 13, 2020, BMW timely removed the action, invoking the Court’s

diversity jurisdiction. (See generally NoR).

II. PRELIMINARY MATTERS

A. Meet and Confer

Both parties accuse each other of failing to comply with Local Rule 7-3, which

details the requirements for meeting and conferring prior to filing a motion. (Remand

Motion at 8; Remand Opp. at 10-11; Arbitration Motion at 23-24). It appears that

Plaintiff’s counsel and BMW’s counsel spoke on the phone twice: first, on March 11,

2020 to discuss the Arbitration Motion; and second, on March 16, 2020 to discuss the

Remand Motion. (See id.). Nonetheless, the parties argue that the phone calls did not

satisfy the Local Rule 7-3 requirement because certain details were not discussed. (See

id.). Aa a result, Plaintiff’s counsel requests that the Court impose sanctions on

BMW’s counsel, and BMW’s counsel requests that the Court deny the Remand

Motion. (See id.).

The Court will not impose sanctions or deny the Remand Motion on the basis of

the parties’ alleged failures to comply with L.R. 7-3, considering the parties had phone

calls to discuss both motions, at least in some capacity.

B. Requests for Judicial Notice

Both parties filed Requests for Judicial Notice in conjunction with their briefs

for the Remand Motion and the Arbitration Motion.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

First, along with its Opposition to the Remand Motion, BMW submitted a

Request for Judicial Notice, requesting that the Court take judicial notice of this

Court’s unpublished order, which denied a plaintiff’s motion to remand. (See Docket

No. 14). Plaintiff did not file an Opposition to this Request for Judicial Notice.

Second, along with its Arbitration Motion, BMW submitted another Request for

Judicial Notice, requesting that the Court take judicial notice of several unpublished

orders that granted BMW’s motion to compel arbitration. (See Docket No. 11).

Plaintiff did not file an Opposition to this Request for Judicial Notice.

Third, in conjunction with its Opposition to the Arbitration Motion, Plaintiff

submitted a Request for Judicial Notice, requesting that the Court take judicial notice

of (1) several district court orders, which denied BMW’s motion to compel arbitration;

(2) a Ninth Circuit opinion, which denied another car manufacturer’s motion to compel

arbitration; and (3) a copy of a plaintiff’s motion for sanctions in another action. (See

Docket No. 16). BMW filed an Opposition to this Request for Judicial Notice.

(Docket No. 23).

As noted above, the majority of the documents attached to the Requests for

Judicial Notice are district court orders regarding motions to remand or motions to

compel arbitration. The Court may take judicial notice of court filings and other

matters of public record. See Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741,

746 n.6 (9th Cir. 2006). However, the Court would consider it odd to take judicial

notice of court filings where they are offered, as here, as persuasive authority. To the

extent that certain cases are binding and are applicable to the facts here, the Court will

consider them in the analysis below.

Accordingly, all the Requests for Judicial Notice are DENIED as moot.

C. Evidentiary Objections

Plaintiff filed two sets of evidentiary objections. First, Plaintiff filed her

Evidentiary Objections and Motion to Strike Evidence Cited by or Referred to in

BMW’s Opposition to Plaintiff’s Motion to Remand Action. (Docket No. 20-2).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Specifically, Plaintiff objects to two declarations of Betty Luu, one which was filed

with the Notice of Removal (Docket No. 4) and another which was filed with BMW’s

Opposition (Docket No. 13-1). (See id.). BMW filed a response on April 13, 2020.

(Docket No. 34).

Second, Plaintiff filed her Evidentiary Objections and Motion to Strike Evidence

Cited by or Referred to BMW’s Arbitration Motion (erroneously titled Objections and

Motion to Strike Evidence Cited by or Referred to “in its Opposition to Plaintiff’s

Motion to Compel Arbitration”). (Docket No. 17). BMW filed a response on April 6,

2020. (Docket No. 24).

None of the objections are convincing as many are garden variety evidentiary

objections based on lack of foundation, hearsay, lack of authentication, and improper

conclusions. In ruling on the motions, the Court relies only upon admissible evidence.

To the extent the Court relies upon evidence to which Plaintiffs object, the objections

are OVERRULED. To the extent the Court does not, the objections are DENIED as

moot.

D. Request to Cross-Examine Declarants

In addition, Plaintiff filed a request to cross-examine declarants Lisa Mendoza,

Tyler Weight, and Betty Luu. (Docket No. 18). BMW filed an objection to the

request. (Docket No. 27).

Lisa Mendoza is a Controller at Long Beach BMW-Mini, and through her

declaration, she attached a copy of the lease agreement for Plaintiff’s Vehicle. (See

Docket No. 10-1; Docket No. 19-1 (“Lease Agreement”)). As noted below, BMW

accidentally forgot to attach the Lease Agreement with Mendoza’s first declaration, but

subsequently attached the agreement in a Notice of Errata. (See id.).

Tyler Weight is the Finance Systems Manager for BMW Financial Services NA,

LLC (“BMW NA”), and asserted in his declaration that BMW and BMW FS are

affiliates of one another because BMW FS is a wholly-owned subsidiary of BMW.

(Declaration of Tyler Weight (“Weight Decl.”) (Docket No. 10-2)).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Betty Luu is one of the attorneys of record for BMW. (Docket No. 4). In one of

her declarations, she attached a copy of the Lease Agreement pertaining to the Vehicle

to the Notice of Removal. (See Docket Nos. 4, 4-2).

Plaintiff argues that cross-examination will reveal that each declarant is

“attempting to testify concerning facts about which [he or she] lacks personal

knowledge” and “that [his or her] claim to have personal knowledge of the alleged

facts is untrue.” (Id. at 2-3).

Plaintiff’s request is not well taken. Plaintiff has produced no evidence or basis

for challenging the assertions made by each declarant. In fact, there does not appear to

be any meaningful dispute that the Lease Agreement is what it purports to be or that

BMW is an affiliate of BMW FS. Therefore, cross-examination of the declarants,

including opposing counsel, is a drastic remedy which is not justified by the facts here.

Accordingly, the Request to Cross Examine Declarants is DENIED.

III. REMAND MOTION

A. Legal Standard

Removal from state court to this Court is proper when diversity of citizenship

exists among the parties and the amount in controversy exceeds $75,000. See 28

U.S.C. §§ 1331, 1332(a).

A defendant carries the “burden of establishing that removal is proper.”

Provincial Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir.

2009). Moreover, when the “complaint does not specify the amount sought as

damages, the removing party must prove by a preponderance of the evidence that the

amount in controversy meets” the $75,000 threshold. Guglielmino v. McKee Foods

Corp., 506 F.3d 676, 683 (9th Cir. 2006). All the following can be used to show that

the amount in controversy threshold has been met: (i) general damages; (ii) special

damages; (iii) attorneys’ fees if recoverable; and punitive damages if recoverable.

Conrad v. Hartford Accident & Indem. Co., 994 F. Supp. 1196, 1198 (N.D. Cal. 1998).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Finally, if any doubt exists as to whether the removing party has the right to

removal, the “case should be remanded to state court.” Matheson v. Progressive

Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).

B. Discussion

The Court notes that Plaintiff did not put forth any substantive argument in its

opening brief. Instead, in her opening brief, she conclusorily asserts that “unless

[BMW] can meet its burden of proving that the removal was proper, this Court should

grant the motion and remand the case to the Superior Court.” (Remand Motion at 8).

After BMW filed its Opposition, Plaintiff advances a number of new arguments for the

first time in her Reply. Specifically, she argues that the Remand Motion should be

granted because BMW has not proven (1) its own citizenship, (2) Plaintiff’s

citizenship, or that (3) the amount in controversy exceeds $75,000. (See generally

Remand Reply). Because this motion deals with the Court’s subject matter

jurisdiction, the Court will address all relevant arguments to determine the Court’s

jurisdiction.

1. Complete Diversity

The Court must first determine the relevant parties to determine complete

diversity. At the time of removal, Plaintiff and BMW were the only named parties.

(See generally Complaint). Nonetheless, Plaintiff asserts in her Remand Motion that

she “intended to add the true name of certain California-based automotive dealerships

that serviced the vehicle.” (Remand Motion at 5). It is not clear whether Plaintiff is

arguing that the Court should consider the citizenship of certain California-based

automotive dealerships, whom Plaintiff has not yet added as defendants in this action.

To the extent that Plaintiff is advancing such an argument, it is rejected.

As BMW argues, Plaintiff’s intent to add a non-diverse party is irrelevant to

determining whether diversity exists. (Remand Opp. at 3). Plaintiff has not named any

defendant other than BMW in her Complaint, and she has made no effort to do so.

Accordingly, the Court will not consider the alleged citizenship of fictitious defendants

in determining whether it has jurisdiction. See 28 U.S.C. § 1441(b)(1) (“In

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

determining whether a civil action is removable on the basis of the jurisdiction under

section 1332(a) of this title, the citizenship of defendants sued under fictitious names

shall be disregarded.”); Newcombe v. Adolf Coors Co., 157 F.3d 686, 690 (9th Cir.

1998) (“28 U.S.C. § 1441(a) explicitly provides that the citizenship of defendants sued

under fictitious names shall be disregarded for purposes of removal. As such, the

district court was correct in only considering the domicile of the named defendants.”).

Accordingly, the Court only examines whether complete diversity exists between the

named parties.

First, BMW has established that Plaintiff is a citizen of California for the

purposes of diversity jurisdiction. A natural person’s state citizenship is determined by

her state of domicile, which is “her permanent home, where she resides with the

intention to remain or to which she intends to return.” Kanter v. Warner-Lambert Co.,

265 F.3d 853, 857 (9th Cir. 2001). The Ninth Circuit has not adopted the presumption

that a person’s current residence is presumed to be the person’s state of domicile.

Mondragon v. Capital One Auto Fin., 736 F.3d 880, 886 (9th Cir. 2013). Instead, “a

court should consider ‘the entire record’ to determine whether evidence of residency

can properly establish citizenship.” Id.

Here, BMW submitted sufficient evidence to support its contention that Plaintiff

is a citizen of California. Specifically, BMW submitted the following: (1) Plaintiff’s

driver’s license; (2) Plaintiff’s grant deed; (3) Plaintiff’s lease agreement; (4)

Plaintiff’s repair records; and (5) Plaintiff’s customer service records for the Vehicle.

(Docket No. 4, Ex. D; Docket No. 13-1, Ex. B). All these records list a California

address for Plaintiff. (See id.). Although Plaintiff argues that BMW has not proven

her citizenship, she does not refute the accuracy of any of the submitted evidence and

does not provide any evidence to the contrary. Because a reasonable inference from

such evidence is that Plaintiff resides in California with the intention to remain here,

BMW has sufficiently established that Plaintiff is a citizen of California for the

purposes of diversity jurisdiction.

Second, BMW has established that it is not a citizen of California. The Notice

of Removal provides that BMW is a “privately held Delaware limited liability

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CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

company with its princip[al] place of business located in Woodcliff Lake, New

Jersey.” (NoR ¶ 17). As a limited liability company, BMW’s principal place of

business or formation under Delaware law is irrelevant for purposes of diversity

jurisdiction. Rather, BMW is a citizen of the state, or foreign country, of which its

owners or members are citizens. Johnson v. Columbia Props. Anchorage, LP, 437

F.3d 894, 899 (9th Cir. 2006) (“[A]n LLC is a citizen of every state of which its

owners/members are citizens.”).

Here, BMW asserts that it is a wholly owned subsidiary of BMW (US) Holding

Corporation, which is the sole member of BMW. (NoR ¶ 17) (citing Corporate

Disclosure Statement ¶ 1 (Docket No. 3)). Therefore, BMW’s citizenship is

determined by the citizenship of BMW (US) Holding Corporation.

A corporation is a deemed a citizen of (1) the state by which it has been

incorporated and (2) the state where it has its principal place of business. 28 U.S.C.

§ 1332(c)(1). A corporation’s “principal place of business” refers to the “nerve center”

of the corporation: the “place where a corporation’s officers direct, control, and

coordinate the corporation’s activities.” Hertz Corp. v. Friend, 559 U.S. 77, 92–93

(2010). The nerve center “should normally be the place where the corporation

maintains its headquarters ….” Id.

Here, BMW asserts that “BMW (US) Holding Corporation is a privately held

Delaware corporation with its principal place of business located in New Jersey.”

(Corporate Disclosure Statement ¶ 1). Accordingly, BMW has established that it is a

citizen of Delaware and New Jersey.

Plaintiff does not dispute that BMW (US) Holding Corporation is incorporated

in Delaware or that its principal place of business is in New Jersey. (See Remand

Reply). Instead, she argues that BMW failed to establish its citizenship because it

failed to provide “any evidence of the citizenship of its members.” (Id. at 4). This

argument is meritless. “A removing defendant . . . need only allege facts sufficient to

establish a party’s citizenship in its notice of removal; it need not adduce evidence

supporting those facts.” Zeppeiro v. Green Tree Servicing, LLC, No. CV 14-01336

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

MMM (JCx), 2014 WL 12596312, at *6 (C.D. Cal. June 16, 2014). “The allegations

in the notice of removal are taken as true; the burden of adducing evidence to support

them is only triggered if the plaintiff adduces evidence in a motion to remand that

rebuts the factual allegations.” Id. Because Plaintiff has not adduced any such

evidence, BMW was not required to provide evidence to support its facts.

Accordingly, BMW has established complete diversity among the parties.

2. Amount in Controversy

The Court also determines that the amount of controversy requirement has been

satisfied.

Plaintiff first argues that BMW cannot establish that the amount in controversy

because its counsel certified in an answer that it lacks sufficient information to deny or

admit Plaintiff’s allegation that the amount in controversy in this matter exceeded

$25,000. (Remand Reply at 6). This argument is unpersuasive. “The basic rule is

that, for jurisdictional purposes, the amount in controversy is measured by the amount

of the claim” so long as the amount appears to be in good faith and not fictitiously

asserted. Riggins v. Riggins, 415 F.2d 1259, 1260 (9th Cir. 1969). Potential defenses

to all or part of the claim do not affect the amount in controversy. See id. at 1261-62.

Therefore, the fact that BMW did not admit or deny in an answer that the amount in

controversy exceeded $25,000 does not affect the Court’s analysis.

Plaintiff then challenges BMW’s calculation of the amount in controversy.

(Remand Reply at 7-13). In its Opposition, BMW asserts that Plaintiff would have

paid a total of $44,383.48 to lease the Vehicle at the end of the lease term. (Remand

Opp. at 7). Because Plaintiff seeks a repurchase of the Vehicle for “the entire purchase

price” as well as “civil penalty of up to two times her actual damages,” BMW asserts

that the amount in controversy from the actual damages and civil penalty alone exceed

the jurisdictional requirement. (Remand Opp. at 7-8) (citing Complaint ¶¶ 12, 29, 32,

37, 44, Prayer for Relief). In addition, BMW notes that Plaintiff seeks attorneys’ fees

under the Song Beverly-Act, and asserts that such fees would increase the amount in

controversy even more. (Remand Opp. at 9).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Plaintiff first criticizes BMW’s estimate of $44,383.48 as the value of the lease

payments. Specifically, Plaintiff notes that the amount should be reduced by the

$5,000 manufacturer’s rebate and by the mileage offset under California Civil Code

§ 1793.2(d)(2)(B), which BMW estimates to be $2,623.67. (Remand Opp. at 7, n.5;

Remand Reply at 7). Plaintiff further argues that actual damages should be lowered

based on BMW’s other potential defenses. Potential defenses are not considered in the

amount in controversy. See Riggins, 415 F.2d at 1261-62 (that the statute of

limitations defense might bar portion of relief sought did not affect amount in

controversy). However, for the purposes of this analysis, the Court will reduce

$7,623.67 from BMW’s estimate and assume an estimated actual damage of

$36,759.81.

Plaintiff also argues that the Court should disregard the civil penalty in its

analysis because BMW has not provided any analysis suggesting an award of civil

penalty would be appropriate based on the facts of the case. (Remand Reply at 8-9).

The Court disagrees. Under the Song-Beverly Act, Plaintiff may be entitled to a civil

penalty of up to two times the amount of restitution if Plaintiff can establish that

BMW’s violations were willful. Cal. Civ. Code § 1794(c). Indeed, Plaintiff alleges

that BMW’s failure to comply with its obligations was “willful” and seeks “a civil

penalty of two times of actual damages.” (Complaint ¶ 29). Like many other district

courts in this circuit, the Court determines that “there is good reason to include the

Song-Beverly Act’s civil penalty of up to two times the amount of actual damages in

the amount in controversy.” Brady v. Mercedes-Benz USA, Inc., 243 F. Supp. 2d 1004,

1009 (N.D. Cal. 2002) (collecting cases where treble damages authorized by state law

may be included in determining the amount in controversy); see also Lawrence v. FCA

US LLC, No. CV 16-05452-BRO (GJSx), 2016 WL 5921059, at *4 (C.D. Cal. Oct. 11,

2016) (considering the maximum civil penalties under the Song-Beverly Act when

determining amount in controversy); Romo v. FFG Ins. Co., 397 F. Supp. 2d 1237,

1240 (C.D. Cal. 2005) (same); Lee v. FCA US, LLC, No. CV 16-5190-PSG (MRWx),

2016 WL 11516754, at *2 (C.D. Cal. Nov. 7, 2016) (same); Gonzalez v. FCA US LLC,

No. EDCV 19-967-PSG (RAOx), 2020 WL 1444941, at *3 (C.D. Cal. Mar. 24, 2020)

(same).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Therefore, to calculate the civil penalty, the Court doubles the amount of

restitution. The amount in dispute for the civil penalty is thus approximately

$73,519.62 ($36,759.81 x 2).

Combining actual damages and civil penalties, BMW has established that the

amount in controversy is approximately $110,279.43, which exceeds the jurisdictional

requirement, before accounting for attorneys’ fees.

BMW has sufficiently established that complete diversity exists and the amount

in controversy exceeds $75,000. Accordingly, the Remand Motion is DENIED.

IV. ARBITRATION MOTION

A. Legal Standard

Under the Federal Arbitration Act (the “FAA”), a party moving to compel

arbitration must show: “(1) the existence of a valid, written agreement to arbitrate; and,

if it exists, (2) that the agreement to arbitrate encompasses the dispute at issue.” Ashbey

v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015). “[C]ourts must

enforce the parties' agreement to arbitrate threshold issues regarding the arbitrability of

the dispute,” but only if there is “clear and unmistakable evidence” that the parties so

agreed. Momot v. Mastro, 652 F.3d 982, 987 (9th Cir. 2011) (internal quotation marks

and citation omitted). The party seeking arbitration need only prove 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).

B. Discussion

BMW argues that Plaintiff must arbitrate her claims because she entered into a

Lease Agreement, which contains an arbitration clause. (Arbitration Motion at 1).

While BMW was not a signatory to the agreement, it further argues that it may enforce

the arbitration clause in the agreement as a third-party beneficiary. The Court agrees.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

1. Valid Arbitration Agreement

Plaintiff first argues that the Arbitration Motion should be denied because BMW

has not presented any evidence that an arbitration agreement exists. (Arbitration

Motion Opp. at 3-4).

In conjunction with the Arbitration Motion, BMW filed a declaration, which

purported to attach the Lease Agreement. (See Declaration of Lisa Mendoza

(“Mendoza Decl.”) (Docket No. 10-1) ¶ 2). However, the declaration did not actually

attach the agreement. (See id.). After Plaintiff noted this error, BMW filed a Notice of

Errata, attaching the Lease Agreement. (Docket No. 17 at 2; Docket No. 19-1). The

Lease Agreement contains an arbitration clause, which provides that the parties “may

choose to have any dispute between [them] decided by arbitration and not in a court or

by jury trial.” (See Lease Agreement ¶ 38).

Although this Notice of Errata was filed after Plaintiff filed the Opposition, the

Court determines that BMW’s error did not prejudice Plaintiff. Plaintiff was well

aware of the Lease Agreement, and in fact, Plaintiff appears to familiar with the

language of the arbitration clause at issue. For example, in her Opposition to the

Arbitration Motion, Plaintiff argues that the “plain language” of the arbitration

provision does not support BMW’s interpretation of the word “affiliate” and cites

different parts of the arbitration provision. (See Arbitration Opposition at 5-6).

Accordingly, the Court determines that BMW’s error did not prejudice Plaintiff and

will consider the Lease Agreement filed with the Notice of Errata. See Malletier v.

Sadia, No. 14-CV-05421-BLF, 2015 WL 7351465, at *3 (N.D. Cal. Nov. 20, 2015)

(“Insofar as those documents are well-known to Defendants and, in fact, derive from

their records, there is no real prejudice.”).

Because BMW has proved the existence of a Lease Agreement with an

arbitration provision, BMW has demonstrated that an arbitration agreement exists.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

2. BMW’s Express Warranty

Even if a valid arbitration agreement exists, Plaintiff argues that BMW cannot

enforce the agreement because BMW’s express warranty “expressly permits Plaintiff

to pursue h[er] Lemon Law claims against [BMW] in court.” (Arbitration Opposition

at 4). Plaintiff bases this argument on the following provision in BMW X-Series

Warranty (Docket No. 15-2):

You are required to use BBB AUTO LINE [a mediation/arbitration

program administered by the Council of Better Business Bureaus] before

asserting in court any rights or remedies conferred by California Civil

Code Section 1793.22. You are not required to use BBB AUTO LINE

before pursuing rights and remedies under any other state or federal law.

You are also required to use BBB AUTO LINE before exercising rights or

seeking remedies created by Title I of the Magnuson-Moss Warranty Act,

15 U.S.C. [§] 2301, et seq. If you choose to seek redress by pursuing rights

and remedies not created by California Civil Code Section 1793.22 or Title

I of the Magnuson-Moss Warranty Act, resort to BBB AUTO LINE is not

required by those statutes.

(Docket No. 15-2 at 26, § 6).

In response, BMW asserts that its pre-litigation arbitration program is irrelevant

to determining whether BMW may enforce the arbitration agreement in the Lease

Agreement. (Arbitration Reply at 2, 8). The Court agrees with BMW. Plaintiff does

not explain why BMW’s pre-litigation arbitration program, which appears to cover

only a subset of Plaintiff’s claims, abrogates BMW’s ability to compel arbitration

pursuant to the Lease Agreement, a separate agreement entered by Plaintiff. Plaintiff

also provides no authority that supports Plaintiff’s argument – that BMW should be

precluded from entering into and enforcing a different arbitration agreement so long as

it maintains a pre-litigation arbitration program.

Accordingly, the Court examines whether BMW may enforce the arbitration

clause in the Lease Agreement as a third-party beneficiary.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

3. Third Party Beneficiary

The parties do not dispute that the Lease Agreement contains an arbitration

clause encompassing claims of alleged defects affecting the Vehicle. However, the

parties disagree as to whether the arbitration clause applies here given that the Lease

Agreement was between Plaintiff and Long Beach BMW-Mini, and BMW was not a

signatory.

“[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 v. Toyota Motor Corp., 705 F.3d 1122, 1128 (9th Cir.

2013) (citing Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 632 (2009)). In

California, “[a] third party beneficiary is someone who may enforce a contract because

the contract is made expressly for his benefit.” Jensen v. U-Haul Co. of California, 18

Cal. App. 5th 295, 301, 226 Cal. Rptr. 3d 797 (2017). The California Supreme Court

has established a three-part test for determining a third-party beneficiary, as follows:

[The Court shall examine] the express provisions of the contract at issue,

as well as all of the relevant circumstances under which the contract was

agreed to, in order to determine not only (1) whether the third party would

in fact benefit from the contract, but also (2) whether a motivating

purpose of the contracting parties was to provide a benefit to the third

party, and (3) whether permitting a third party to bring its [] action against

a contracting party is consistent with the objectives of the contract and the

reasonable expectations of the contracting parties.

Goonewardene v. ADP, LLC, 6 Cal. 5th 817, 829–30, 243 Cal. Rptr. 3d 299 (2019).

The California Supreme Court noted that, generally, “[t]he circumstances that a literal

contract interpretation would result in a benefit to the third party is not enough to

entitle that party to demand enforcement. The contracting parties must have intended

to confer a benefit on the third party.” Id. at 835 (internal quotation marks and

citations omitted). For a third-party action to go forward, all three elements must be

satisfied. Id. at 830.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

Here, BMW argues that two provisions of the Lease Agreement demonstrate that

the parties expressly intended to benefit BMW. (Motion at 8-10).

First, BMW points to the Warranties language, which states that “if the Vehicle

is new, the Vehicle is subject to the standard manufacturer’s new vehicle warranty.”

(Lease Agreement ¶ 16). Because BMW provides the warranty, BMW argues that it is

a “third party” contemplated by the arbitration provision. (Motion at 9).

Second, BMW points to the arbitration provision, which defines “Claim” as

“any claim, dispute, or controversy . . . between me and you and your employees,

officers, directors, affiliates, successors or assigns . . ., which arises out of or relates to

my . . . lease, purchase or condition of this Vehicle, this Lease or any resulting

transaction or relationship.” (Lease Agreement ¶ 38) (emphasis added). BMW asserts

that it is an intended and identified third party beneficiary of the Lease Agreement

because it is an affiliate of BMW FS, and BMW FS is the assignee of the Lease

Agreement. (Weight Decl. ¶ 3; Lease Agreement ¶ 2; Arbitration Motion at 10).

BMW further argues that Plaintiff’s claims against it “arose out of and relate to”

Plaintiff’s Lease Agreement and the “condition” of the Vehicle, which are both

encompassed within the arbitration provision definition of a “claim.”

In response, Plaintiff challenges BMW’s interpretation of the “Claim”

definition. First, Plaintiff argues that only the lessee and the lessor, the signatories to

the agreement, may invoke the arbitration provision unless Plaintiff asserts a claim

against a third party in connection with a claim she assert against the lessor.

(Arbitration Opposition at 16). Because Plaintiff has not asserted a claim against the

lessor, she argues that BMW may not invoke the arbitration provision. (Id.). Second,

Plaintiff argues that the Court should reject BMW’s argument that her claims against it

“arose out of and relate to” the Lease Agreement and the “condition” of the Vehicle.

(Id. at 17). Plaintiff argues that this is functionally identical to BMW’s equitable

estoppel theory, which has been rejected by several courts. (Id.).

The Court agrees with BMW. The Court first does not agree with Plaintiff that

the arbitration clause allows BMW (an affiliate of BMW FS) to invoke the arbitration

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

clause only if Plaintiff asserts a claim against the lessor. The relevant provision of the

arbitration clause provides the following:

Unless otherwise specified, “I,” “me” and “my” refer to the Lessee and

“you” and “your” refer to the Lessor or Lessor’s assignee. . . .

“Assignee” refers to BMW Financial Services NA, LLC (“BMW FS”) . . .

. . .

“Claim” broadly means any claim, dispute or controversy, whether in

contract, tort, statute or otherwise, . . ., between me and you or your

employees, officers, directors, affiliates, successors or assigns, or between

me and any third parties if I assert a Claim against such third parties in

connection with a Claim I assert against you, which arises out of or

relates to my credit application, lease, purchase or condition of this

Vehicle, this Lease or any resulting transaction or relationship (including

any such relationship with third parties who do not sign this Lease).

(Lease Agreement ¶¶ 2, 38) (emphasis added). In other words, the provision

states that the “Claim” means any claim between Plaintiff and BMW FS’s

affiliates, or alternatively, any third party if Plaintiff asserts a claim against such

third parties in connection with a claim she asserts against the lessor. Because

BMW argues that it is an affiliate of BMW FS, the second part of the clause

regarding third parties does not apply.

The Court also determines that all of Plaintiff’s claims against BMW “arise[] out

of or relate[] to” the “condition” of Plaintiff’s Vehicle. The Complaint details the

defects that she encountered on the Vehicle and asserts six claims against BMW based

on such defects. (See generally Complaint). Specifically, Plaintiff asserts that BMW

breached various warranties by selling a defective product and violated other

California laws for failing to repurchase or repair such defects. (See Complaint ¶¶ 5-

44). Therefore, the plain language of the arbitration clause demonstrates the parties’

intent to expressly provide a benefit to BMW with regard to Plaintiff’s claims asserted

in this action. It also appears to be consistent with the objectives of the contract and

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

the reasonable expectations of the contracting parties since the Warranties clause states

that the manufacturer – BMW in this case – would provide a new vehicle warranty.

Finally, the Court rejects Plaintiff’s argument that this analysis is functionally

identical to BMW’s equitable estoppel theory. Equitable estoppel examines

(1) whether “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) whether “the signatory alleges substantially

interdependent and concerted misconduct by the signatory and another signatory and

the allegations of interdependent misconduct [are] founded in or are intimately

connected with the obligations of the underlying agreement.” Kramer v. Toyota Motor

Corp., 705 F.3d 1122, 1128-29 (9th Cir. 2013), cert denied, 571 U.S. 818 (2013)

(internal quotation marks and citation omitted).

For this analysis, the Court is not examining whether Plaintiff’s claims are

intimately founded in and intertwined with the Lease Agreement or whether Plaintiff

alleges substantially interdependent and concerted misconduct between BMW and

another signatory. Rather, the Court is examining whether Plaintiff’s claims “arise[]

out of or relate[] to” the “condition” of Plaintiff’s Vehicle – which is what is required

based on the language of the Lease Agreement. As explained above, the Court

determines that they do. Therefore, the Court concludes that BMW is a third-party

beneficiary to the Lease Agreement and may compel arbitration of this action.

4. Binding Arbitration under the MMWA

Even if a valid arbitration agreement existed between Plaintiff and BMW,

Plaintiff further argues that her warranty claims are not subject to binding arbitration.

(Arbitration Opposition at 18-22). Specifically, she argues that the federal Magnuson

Moss Warranty Act (“MMWA”) bars the enforcement of arbitration provisions

covering warranty agreements. (Id. at 19). In making this argument, Plaintiff relies on

Federal Trade Commission (“FTC”) Regulations under 16 C.F.R. § 703 and the

corresponding rulings, which impose certain restrictions on binding informal

settlement. (See id. at 18-22). While Plaintiff has not asserted an MMWA claim, she

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

argues that the Song-Beverly Act incorporates MMWA rules regarding arbitration by

reference. (Id. at 18).

The Court notes that Plaintiff failed to cite any authority holding that binding

arbitration is barred under the MMWA. In fact, federal circuit courts that have

addressed this exact issue have held otherwise. See Motor Vehicle Mfrs. Ass'n of U.S.,

Inc. v. Abrams, 899 F.2d 1315, 1317 (2d Cir. 1990) (“[N]othing in the [MMWA] or the

FTC Regulations forbids a warrantor from entering into binding arbitration.”); Walton

v. Rose Mobile Homes LLC, 298 F.3d 470, 479 (5th Cir. 2002) (“We hold that the

MMWA does not preclude binding arbitration of claims pursuant to a valid binding

arbitration agreement, which the courts must enforce pursuant to the FAA.”); Davis v.

S. Energy Homes, Inc., 305 F.3d 1268, 1280 (11th Cir. 2002) (“After a thorough

review of the MMWA and the FAA, combined with the strong federal policy favoring

arbitration, we hold that written warranty claims arising under the Magnuson–Moss

Warranty Act may be subject to valid binding arbitration agreements.”).

Following such authority, district courts in this circuit have similarly held that

MMWA and the FTC regulations do not bar arbitration of written warranty claims.

See e.g., Jones v. Gen. Motors Corp., 640 F. Supp. 2d 1124, 1137, 1140 (D. Ariz.

2009) (“The legislative history of the MMWA likewise provides no indication that

Congress intended to preclude resolution of its claims through binding arbitration. . . .

Under the plain meaning of these terms, binding arbitration is not an ‘informal

settlement.’ Binding arbitration formally and finally resolves a legal claim; it does not

involve the voluntary surrender of the right to pursue a claim.”); Brown v. BYRV, Inc.,

No. 3:14-CV-01213-AC, 2015 WL 4507159, at *18 (D. Or. July 24, 2015) (“[A]fter

careful consideration, the court follows the well-reasoned opinions of the Fifth and

Eleventh Circuits skillfully applying the McMahon and Chevron tests to the question

of whether the MMWA prohibits binding arbitration. Accordingly, the court finds the

MMWA does not prohibit enforcement of a binding, pre-dispute arbitration provision

found in a written warranty.”).

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

The Court finds no reason to deviate from such well-reasoned authority.

Accordingly, the Court determines that the MMWA (and by extension, the Song-

Beverly Act) does not prohibit binding arbitration.

5. Collateral Estoppel

Plaintiff additionally argues that the Arbitration Motion is barred by collateral

estoppel. (Arbitration Opposition at 22-23). The Court disagrees.

First, based on the parties’ requests for judicial notice, it appears that BMW has

had a mixed record regarding its efforts to compel arbitration. (See Docket Nos. 11,

16). Specifically, BMW has provided a handful of cases, where the district court

granted BMW’s motion to compel arbitration based on BMW’s third-party beneficiary

status. (Arbitration Reply at 11-12). Given such inconsistent results, the Court

determines that allowing Plaintiff to apply offensive collateral estoppel would be

unfair. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 330 (1979) (“Allowing

offensive collateral estoppel may also be unfair to a defendant if the judgment relied

upon as a basis for the estoppel is itself inconsistent with one or more previous

judgments in favor of the defendant.”).

Second, BMW notes that he arbitration provision in this case is distinguishable

from those in the cases cited by Plaintiff. (Arbitration Reply at 12-13). Notably,

BMW points out that the arbitration provisions in the other cases did not include the

term “affiliates” in defining the types of claims that could be subject to arbitration. As

such, courts in those cases did not examine whether BMW was an affiliate of BMW FS

– a critical issue in this case.

Accordingly, the Court determines that BMW is a third-party beneficiary who

may enforce arbitration of this action and that BMW is not collaterally estopped from

enforcing its right to arbitrate. Because the Court determines that BMW is a third-

party beneficiary, the Court need not determine whether it is also entitled to enforce the

arbitration agreement under the equitable estoppel doctrine.

______________________________________________________________________________

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES—GENERAL

Case No. CV 20-2466-MWF (AGRx) Date: May 20, 2020

Title: Jacqueline Phillips-Harris v. BMW of North America, LLC, et al.

V. CONCLUSION

For the foregoing reasons, the Remand Motion is DENIED and the Arbitration

Motion is GRANTED.

In the Ninth Circuit, the district court has discretion to dismiss a party’s

complaint where the court finds that the arbitration clause covers all of the party’s

claims. See, e.g., Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d 1072, 1074 (9th

Cir. 2014) (affirming dismissal of action where “all of [the plaintiff’s] claims fall

within the scope of th[e] arbitration agreement”); Sparling v. Hoffman Const. Co., Inc.,

864 F.2d 635, 638 (9th Cir. 1988) (affirming dismissal of action where “the arbitration

clause was broad enough to bar all of the plaintiff’s claims since it required [the

plaintiff] to submit all claims to arbitration”). Because the Lease Agreement

encompasses all of Plaintiff’s claims, the Court in its discretion chooses dismissal

instead of a stay.

Accordingly, the action is DISMISSED without prejudice.

This Order shall constitute notice of entry of judgment pursuant to Federal Rule

of Civil Procedure 58. Pursuant to Local Rule 58-6, the Court ORDERS the Clerk to

treat this Order, and its entry on the docket, as an entry of judgment.

IT IS SO ORDERED.

______________________________________________________________________________