60 Cal.App.5th 829
Cal. Ct. App.2021Background
- Putnam operated a Subaru "Satellite Service Facility" in San Francisco under a 2009 Satellite Service Agreement (service-only) and separately operated a Burlingame dealer under a Burlingame Dealer Agreement (sale + service). The Satellite Agreement contained an arbitration clause designating New Jersey law and AAA rules.
- Subaru extended the Satellite Agreement in 2013 but later refused Putnam’s proposed relocation and notified Putnam it would not renew the Satellite Agreement when it expired in 2019. Putnam filed termination and modification protests with the New Motor Vehicle Board.
- Subaru petitioned to compel arbitration of Putnam’s claims; the trial court compelled arbitration of the Satellite Agreement claims but preserved Putnam’s Board protests concerning the dealer agreement. The parties stayed Board proceedings pending arbitration.
- The arbitrator first held the Satellite Agreement was a Vehicle Code "franchise" for choice-of-law purposes and that California law (good-cause standard under §§ 3060–3061) applied. After a merits hearing the arbitrator found Subaru had shown good cause to terminate.
- The trial court confirmed the arbitration award. Putnam appealed, arguing the arbitrator lacked jurisdiction (federal and state), the arbitration clause was unlawful under Vehicle Code § 11713.3, the award violated public policy, the award could not be corrected without affecting the merits, and Putnam’s due process rights were prejudiced by inadequate notice of termination reasons. The Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument (Subaru) | Defendant's Argument (Putnam) | Held |
|---|---|---|---|
| 1) Whether the Fairness Act / FAA exception bars arbitration of the Satellite Service Agreement | Satellite Agreement is a separate, service-only contract and thus not a "motor vehicle franchise contract" under 15 U.S.C. § 1226; FAA governs and arbitration is enforceable | Agreement must be read with the Burlingame Dealer Agreement (Civ. Code § 1642) to qualify as a motor vehicle franchise contract exempt from arbitration | Held: Agreements are separate; the Satellite Agreement is not a motor vehicle franchise contract under the Fairness Act, so FAA/arbitration applies. |
| 2) Whether California New Motor Vehicle Board Act / § 11713.3 give the Board exclusive jurisdiction and bar arbitration | § 11713.3(g) (as in effect for contracts entered ≤2011) expressly permits arbitration before an independent arbitrator; Board does not have exclusive jurisdiction to the exclusion of arbitration here | Board alone must decide good-cause protests under § 3060; § 11713.3(g) should preclude arbitration of this dispute | Held: Former § 11713.3(g) and current text track the Fairness Act exception and do not bar arbitration of the service-only agreement; Board exclusivity does not defeat arbitration here. |
| 3) Whether arbitration clause is illegal under § 11713.3(g)(1)(B)/(C) (limits on evidence / requiring dealer to terminate) | Those subparagraphs do not, in context, make arbitration unlawful; they preserve dealers’ rights before the Board but do not forbid arbitration or make the clause unenforceable | The statute’s protections for dealer protests and against compelled termination render the arbitration clause illegal and unenforceable | Held: In context, those provisions do not render arbitration illegal; arbitration provision enforceable for this pre‑2012 contract. |
| 4) Whether Putnam was denied due process because Subaru failed to give adequate notice of termination reasons | Putnam had actual notice through correspondence and the arbitration record; arbitrator limited Subaru to the grounds actually noticed and Putnam declined further time; no substantial prejudice | Lack of written statutory notice under § 3060 prejudiced Putnam’s ability to prepare and violated due process, warranting vacatur | Held: Record shows Putnam had actual notice and a full opportunity to respond; no substantial prejudice demonstrated, so award not vacated on due process grounds. |
Key Cases Cited
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (arbitration awards generally immune from merits review; limited statutory vacatur grounds)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rules that conflict with arbitration enforcement)
- Preston v. Ferrer, 552 U.S. 346 (U.S. 2008) (FAA can preempt state laws that grant exclusive forum jurisdiction inconsistent with arbitration agreements)
- American Isuzu Motors v. New Motor Vehicle Bd., 186 Cal.App.3d 464 (Cal. Ct. App. 1986) (statutory notice requirements for termination protests under § 3060 protect procedural due process)
- Lopez v. Sony Electronics, Inc., 5 Cal.5th 627 (Cal. 2018) (statutory interpretation: court applies plain meaning when language is clear)