HAJIBEKYAN v. BMW OF NORTH AMERICA LLC 100 (2021)

United States Court of Appeals, Ninth Circuit.2021-03-09No. No. 20-55609

Summary · law.co

Holding. The court affirmed the district court's order compelling arbitration, holding that BMW NA could enforce the arbitration clause in the lease agreement as a third-party beneficiary because it was an affiliate of BMW Financial Services, the named assignee, and the clause expressly covered claims against affiliates.

Karo Hajibekyan leased a vehicle through BMW Pacific and signed a lease agreement containing an arbitration clause. When he sued BMW of North America (BMW NA), the car manufacturer sought to enforce the arbitration clause and dismiss his claims. The district court granted BMW NA's request, finding it could enforce the clause both as a third-party beneficiary and under equitable estoppel principles.

On appeal, the court examined whether BMW NA, as a nonsignatory to the lease agreement, could compel arbitration under California law. The arbitration clause explicitly covered disputes with the dealership and its "affiliates, successors or assigns." Because BMW NA is the parent company of BMW Financial Services (the assignee named in the agreement), the court determined it qualified as an affiliate and thus an intended beneficiary of the arbitration clause. The court rejected the argument that BMW Financial Services' status as a limited liability company prevented its parent from being considered an affiliate. Accordingly, BMW NA had standing to enforce the arbitration provision against Hajibekyan's claims.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a nonsignatory manufacturer can enforce an arbitration clause as a third-party beneficiary
Whether a parent company qualifies as an 'affiliate' of its subsidiary limited liability company under California law
Scope of arbitration clause language covering claims against 'affiliates, successors or assigns'

Procedural posture

Hajibekyan appealed the district court's order granting BMW NA's motion to compel arbitration and dismiss his claims under the arbitration clause in his vehicle lease agreement.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

MEMORANDUM ***

Karo Hajibekyan appeals from the district courts order compelling arbitration of and dismissing his claims against BMW of North America, LLC (BMW NA) under the arbitration clause in his lease agreement with BMW Pacific, a car dealership. The district court held that BMW NA could enforce the arbitration clause as a third-party beneficiary of the lease agreement and, alternatively, that BMW NA could compel arbitration under the doctrine of equitable estoppel. We have jurisdiction under 9 U.S.C. § 16(a)(3) and review the district courts order compelling arbitration de novo. Ziober v. BLB Res., Inc., 839 F.3d 814, 816 (9th Cir. 2016); Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1126 (9th Cir. 2013). Because we affirm on the ground that BMW NA can enforce the arbitration clause as a third-party beneficiary of the lease agreement, we do not consider the doctrine of equitable estoppel.

California law governs whether BMW NA can compel arbitration as a third-party beneficiary of the lease agreement. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630–31, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009); Murphy v. DIRECTV, Inc., 724 F.3d 1218, 1233 (9th Cir. 2013). Under California law, a nonsignatory to an agreement may enforce a contract if the “agreement was ‘made expressly for [its] benefit.’ ” Ronay Fam. Ltd. Pship v. Tweed, 216 Cal.App.4th 830, 157 Cal. Rptr. 3d 680, 685–86 (2013) (quoting Cal. Civ. Code § 1559). When an arbitration clause provides that it covers claims involving particular parties, the agreement has been made expressly for the benefit of those parties. See id. at 686; Cione v. Foresters Equity Servs., Inc., 58 Cal.App.4th 625, 68 Cal. Rptr. 2d 167, 173 (1997).

The arbitration clause in Hajibekyans lease agreement encompasses “any claim, dispute or controversy ․ between me and you or your employees, officers, directors, affiliates, successors or assigns.” The agreement specifies that “me” refers to Hajibekyan and “you” and “your” refer to Pacific BMW and its assignee, BMW Financial Services NA, LLC (BMW FS). The clause therefore expressly covers claims between Hajibekyan and the affiliates of Pacific BMW and BMW FS, including BMW NA—the parent company of BMW FS. Because the claims subject to the arbitration agreement include claims against BMW NA, BMW NA is an intended beneficiary of the agreement and can enforce its terms. See Philadelphia Indem. Ins. Co. v. SMG Holdings, Inc., 44 Cal.App.5th 834, 257 Cal. Rptr. 3d 775, 781–82 (2019); Ronay Fam., 157 Cal. Rptr. 3d at 686; Cione, 68 Cal. Rptr. 2d at 173.

We reject Hajibekyans argument that BMW FSs status as a limited liability company prevents its parent company, BMW NA, from enforcing the arbitration clause as an affiliate of BMW FS. Under California law, a limited liability company is distinct from other related entities, Cal. Corp. Code §§ 17701.04(a), 17703.04(a), but that does not mean that it cannot be affiliated with those related entities, see Revitch v. DIRECTV, LLC, 977 F.3d 713, 717 (9th Cir. 2020). As BMW FSs parent company, BMW NA is an affiliate of BMW FS.

AFFIRMED.