Zaghi v. The Kroger Co. CA2/3 ( 2023 )

Filed 6/29/23 Zaghi v. The Kroger Co. CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
AYDA ZAGHI, B316460
Plaintiff and Respondent, Los Angeles County
Super. Ct. No.
v. 20STCV00193
THE KROGER CO. et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Maren E. Nelson, Judge. Affirmed.
Davis Wright Tremaine, Jacob M. Harper, James H. Moon,
and Peter K. Bae for Defendants and Appellants.
Yeroushalmi & Yeroushalmi and Reuben Yeroushalmi for
Plaintiff and Respondent.
_______________________________________
INTRODUCTION
Plaintiff Ayda Zaghi, individually and on behalf of all
others similarly situated, sued Ralphs Grocery Company and The
Kroger Co. (collectively, Ralphs) for falsely advertising that a loaf
of bread she purchased from Ralphs through Instacart’s virtual
storefront was certified kosher. Ralphs moved to compel
arbitration of Zaghi’s claims, arguing it is a third-party
beneficiary of an arbitration provision included in Instacart’s
terms of service. The court denied Ralphs’s motion, concluding
Instacart’s arbitration provision applies only to disputes between
Instacart and its customers. In any event, the court concluded,
Zaghi’s claims were not the type of disputes covered by
Instacart’s arbitration provision.
On appeal, Ralphs contends the court erred in denying its
motion to compel arbitration because (1) Instacart’s arbitration
provision requires an arbitrator, and not the court, to resolve
issues of arbitrability, such as whether a nonsignatory to
Instacart’s terms of service can enforce the arbitration provision;
and (2) Ralphs is a third-party beneficiary of Instacart’s terms of
service, including the arbitration provision. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Instacart is an online platform that provides an online
storefront for customers to purchase groceries and other items
from third-party retailers and arrange for those items to be
delivered by independent contractors. Ralphs is a grocery store
that operates as a third-party retailer on Instacart’s online
storefront.
In February 2016, Zaghi created an Instacart account. In
doing so, she accepted Instacart’s Terms of Service, which
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include, among other things, an arbitration provision. By
accepting the Terms of Service, an Instacart customer agrees to
arbitrate any “dispute with Instacart arising out of [the
customer’s] use of [Instacart’s] services” if the customer and
Instacart can’t first “work out any such dispute amicably.” The
arbitration provision provides that any arbitration between
Instacart and its customers “shall be administered by the
[Judicial Arbitration and Mediation Service (JAMS),] under its
Comprehensive Rules in effect at the time the arbitration
demand is made.” If there is any conflict between the arbitration
provision and JAMS’s rules and procedures, the arbitration
provision “shall apply.” The arbitration provision also includes a
class action waiver. A customer may opt out of mandatory
arbitration by timely providing Instacart with notice of the
customer’s intent to opt out of the arbitration provision.
Instacart’s Terms of Service also include a choice of law
provision stating that California law governs the application and
interpretation of the agreement for customers residing in the
United States. Additionally, the Terms of Service include release
of claims, indemnification, and limitation of liability provisions.
The release of claims and limitation of liability provisions state
that they apply to, among other entities, Instacart’s retail
partners. Instacart’s arbitration provision does not include
similar language, however.
In November 2018, Instacart added the following
disclaimer to the first page of its Terms of Service:
SECTION 11 (“DISPUTES & ARBITRATION”)
OF THESE TERMS PROVIDE THAT ANY CLAIMS
THAT YOU AND INSTACART HAVE AGAINST
EACH OTHER, INCLUDING, WITHOUT
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LIMITATION, ANY CLAIMS THAT AROSE OR
WERE ASSERTED BEFORE THE EFFECTIVE
DATE OF THESE TERMS, WILL, WITH LIMITED
EXCEPTIONS, BE SUBMITTED TO BINDING AND
FINAL ARBITRATION. UNLESS YOU OPT OUT
OF THE ARBITRATION AGREEMENT YOU WILL
ONLY BE PERMITTED TO PURSUSE CLAIMS
AND SEEK RELIEF AGAINST INSTACART ON AN
INDIVIDUAL BASIS, NOT AS A PLAINTIFF OR
CLASS MEMBER IN ANY CLASS OR
REPRESENTATIVE ACTION OR PROCEEDING.
YOU ALSO WAIVE YOUR RIGHT TO SEEK
RELIEF IN A COURT OF LAW AND TO HAVE A
JURY TRIAL ON YOUR CLAIMS. PLEASE SEE
SECTION 11 FOR MORE INFORMATION
REGARDING THIS ARBITRATION AGREEMENT,
THE POSSIBLE EFFECTS OF THIS
ARBITRATION AGREEMENT, AND HOW TO OPT
OUT OF THE ARBITRATION AGREEMENT.1
In 2019, Zaghi used her Instacart account to purchase a
loaf of rye bread from Ralphs.2 Zaghi purchased the bread
because it was advertised to be certified kosher. Specifically,
Zaghi saw an “OK Kosher” certification sticker on the bread’s
1 Between, November 2015 and June 2019, Instacart updated its
Terms of Service several times without making any changes to the
terms of its arbitration provision that are material to Zaghi’s lawsuit.
2According to Instacart’s senior litigation paralegal, a customer must
agree to Instacart’s Terms of Service every time the customer places an
order through the company’s platform.
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label posted on Ralphs’s Instacart page. Zaghi also saw the
certification sticker on the bread’s packaging and on Ralphs’s
website. Zaghi later learned that the bread was not certified to be
kosher by OK Kosher, the trademark licensee of the certification
sticker included on the bread’s label.
In January 2020, Zaghi sued Ralphs, claiming the grocery
store falsely advertised that the loaf of bread she purchased was
certified kosher. According to Zaghi, she relies “on certifications
by specific certifying organizations, provided on packaging via a
statement or symbol, that food products are kosher when so
indicated,” and she would not have purchased the loaf of bread
had Ralphs not advertised the product to be certified kosher.
Zaghi’s operative third amended complaint includes class
allegations and asserts three causes of action for false advertising
under Business and Professions Code sections 17200 and17500
and Civil Code section 1750.
Ralphs moved to compel arbitration of Zaghi’s claims.
Ralphs claimed it was a third-party beneficiary of the arbitration
provision included in Instacart’s Terms of Service. When Zaghi
accepted those terms, Ralphs argued, she agreed to arbitrate any
disputes with Ralphs arising out of her use of Instacart to
purchase goods from the grocery store. To the extent Zaghi
challenged Ralphs’s standing to enforce the arbitration provision,
Ralphs argued the court was required to submit that question to
arbitration because JAMS’s rules and procedures require issues
of arbitrability to be decided by the arbitrator.
The court denied Ralphs’s motion. The court found Ralphs
was not a third-party beneficiary of Instacart’s arbitration
provision. The court reasoned that, unlike other provisions of
Instacart’s Terms of Service, the arbitration provision does not
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state that it applies to any third parties, such as Instacart’s retail
partners. Rather, the agreement states only that an Instacart
customer is required to arbitrate disputes between herself and
Instacart over her use of Instacart’s services. Since the parties
knew how to draft provisions of the Terms of Service for the
benefit of third parties, such as third-party retailers like Ralphs,
the absence of such language in the arbitration provision shows
the parties did not intend for that agreement to benefit third
parties.
The court also rejected Ralphs’s arbitrability argument.
Under the language of Instacart’s arbitration provision, Zaghi
agreed only to arbitrate disputes, including disputes over issues
of arbitrability, between herself and Instacart. Since Instacart’s
arbitration provision does not clearly show Zaghi agreed to
arbitrate the issue of arbitrability with nonsignatories, the “
‘court had the authority to decide whether the instant dispute is
arbitrable.’ ” In any event, the court concluded, Zaghi’s claims
against Ralphs did not fall within the scope of the arbitration
provision because they do not arise out of any conduct by
Instacart. Instead, the court reasoned, Zaghi’s claims are
incidental to her use of Instacart and arise directly out of
Ralphs’s alleged false advertising concerning one of its products,
conduct that Ralphs engaged in not just on the Instacart page,
but also on its product packaging and on its website.
Ralphs appeals.
DISCUSSION
Ralphs argues the court erred in denying its motion to
compel arbitration because an arbitrator, and not the court,
should have decided the issue of arbitrability—i.e., whether a
nonsignatory like Ralphs can enforce the arbitration provision in
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Instacart’s Terms of Service. In any event, Ralphs argues, it is
entitled to enforce the arbitration provision as a third-party
beneficiary of those Terms of Service. As we explain, both of
Ralphs’s arguments lack merit.
1. Applicable Law and Standard of Review
The Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) and
the California Arbitration Act (CAA) (Code Civ. Proc., § 1280 et
seq.) favor enforcement of valid arbitration agreements.3
(Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83;
Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41
Cal.4th 19, 31.) This policy does not extend, however, to those
who are not parties to an arbitration agreement. (Howsam, at p.
83; Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990.) Nor can
a party “be compelled to arbitrate a dispute that [she] has not
agreed to resolve by arbitration.” (Benasra, at p. 990.)
A court must order a dispute to arbitration “when the party
seeking to compel arbitration proves the existence of a valid
arbitration agreement covering the dispute.” (Laswell v. AG Seal
Beach, LLC (2010) 189 Cal.App.4th 1399, 1404–1405.) Where, as
here, the underlying facts are undisputed, we independently
review an order denying a motion to compel arbitration. (Banc of
California, National Assn. v. Superior Court (2021) 69
Cal.App.5th 357, 367.)
3 As Ralphs acknowledges, we need not determine whether the CAA or
the FAA governs Instacart’s arbitration provision because the
statutory schemes are “interpreted the same under controlling
precedent.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231,
241.)
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2. The court had the authority to decide whether Ralphs
could enforce the arbitration provision.
As a threshold matter, Ralphs contends the court lacked
the authority to decide whether the grocery store could enforce
Instacart’s arbitration provision because that provision
incorporates JAMS’s rules and procedures, which include a
delegation clause granting exclusive authority to decide
arbitrability issues to an arbitrator.4 Since Zaghi accepted
Instacart’s Terms of Service and did not opt out of the arbitration
provision, Ralphs argues she agreed to submit any issues of
arbitrability to the arbitrator—including whether a nonsignatory
to Instacart’s Terms of Service can enforce Instacart’s arbitration
provision. We disagree.
Parties to an arbitration agreement may agree to delegate
the authority to decide issues of arbitrability to an arbitrator.
(Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1439–
1440.) They may do so by incorporating into the arbitration
agreement JAMS’s rules and procedures for arbitration. (Id. at p.
1442.) Courts should not assume that parties to a lawsuit
involving an arbitration provision agreed to arbitrate
arbitrability, however, unless there is clear and unmistakable
evidence that they did so. (Id. at p. 1440, citing First Options of
Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 945 (First Options).)
4Rule 11(b) of JAMS’s Comprehensive Arbitration Rules & Procedures
provides: “Jurisdictional and arbitrability disputes, including disputes
over the formation, existence, validity, interpretation or scope of the
agreement under which Arbitration is sought, and who are proper
Parties to the Arbitration, shall be submitted to and ruled on by the
Arbitrator. The Arbitrator has the authority to determine jurisdiction
and arbitrability issues as a preliminary matter.”
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As the United States Supreme Court has explained, issues
of arbitrability generally are reserved for judicial determination.
(First Options, supra, 514 U.S. at p. 945.) Thus, courts should not
interpret silent or ambiguous contracts in favor of arbitrating
issues of arbitrability. (Ibid.) “[G]iven the principle that a party
can be forced to arbitrate only those issues it specifically has
agreed to submit to arbitration, one can understand why courts
might hesitate to interpret silence or ambiguity on the ‘who
should decide arbitrability’ point as giving arbitrators that power,
for doing so might too often force unwilling parties to arbitrate a
matter they reasonably would have thought a judge, not an
arbitrator, would decide.” (Ibid.)
The FAA’s presumption in favor of courts resolving
arbitrability issues applies to questions concerning whether a
nonsignatory can enforce an arbitration agreement against a
signatory. (Kramer v. Toyota (9th Cir. 2013) 705 F.3d 1122, 1126–
1128 (Kramer) [it is “ ‘well settled that where the dispute at issue
concerns contract formation, the dispute is generally for courts to
decide’ ”].) California courts have interpreted the CAA in a
similar manner. (See Matthau v. Superior Court (2007) 151
Cal.App.4th 593, 598 [“the policy favoring arbitration does not
eliminate the need for an agreement to arbitrate and does not
extend to persons who are not parties to an agreement to
arbitrate”].) Thus, before a clause delegating authority to resolve
arbitrability issues to an arbitrator may be enforced against a
signatory, a court must first determine whether the signatory
agreed to arbitrate arbitrability with the person or entity seeking
to enforce the arbitration agreement. (Benaroya v. Willis (2018)
23 Cal.App.5th 462, 469 (Benaroya) [“ ‘The question of whether a
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nonsignatory is a party to an arbitration agreement is one for the
trial court in the first instance.’ ”].)
Instacart’s arbitration provision states that Zaghi and
Instacart agree to resolve through binding arbitration any
disputes concerning Zaghi’s use of Instacart’s online shopping
platform or the interpretation of the company’s Terms of Service.
The first page of the Terms of Service that were in effect when
Zaghi made the underlying purchase similarly states that “ANY
CLAIMS THAT YOU [i.e., Zaghi] AND INSTACART HAVE
AGAINST EACH OTHER … WILL, WITH LIMITED
EXCEPTIONS, BE SUBMITTED TO BINDING AND FINAL
ARBITRATION.” Neither the arbitration provision nor any other
section of the Terms of Service states that Zaghi agreed to
arbitrate disputes with any person or entity other than Instacart.
Thus, under a literal reading of Instacart’s Terms of Service,
Zaghi agreed only to arbitrate disputes between herself and
Instacart, including disputes over the interpretation of the
arbitration provision. (Martinez v. BaronHR, Inc. (2020) 51
Cal.App.5th 962, 967 (Martinez) [contract language controls if it
is clear and explicit].)
Kramer, supra, 705 F.3d 1122, which involves facts similar
to those at issue in this case, is instructive. (See Brakke v.
Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 770
[although decisions of federal courts on similar issues are not
binding, they may be persuasive].) There, a group of plaintiffs
purchased cars from various dealerships. (Kramer, at p. 1124.)
The plaintiffs sued the cars’ manufacturer based on product
defects and false advertising. (Id. at p.1125.) The manufacturer,
who was not a party to the purchase agreements between the
plaintiffs and the dealerships, moved to compel the plaintiffs to
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arbitrate their claims based on arbitration provisions included in
those purchase agreements. (Id. at pp. 1124–1125.) The
arbitration provisions, which were all similarly worded, stated
that they applied to disputes between the car buyers—i.e., the
plaintiffs—and the dealerships. (Id. at p. 1124.) The arbitration
provisions also included delegation clauses, stating that the
provisions applied “to any claim or dispute about the
interpretation and scope” of the provisions, as well as to “any
claim or dispute about whether a claim or dispute should be
determined by arbitration.” (Id. at p.1125.)
The district court denied the manufacturer’s motion to
compel arbitration, and the Ninth Circuit affirmed the district
court’s order. (Kramer, supra, 705 F.3d at pp. 1125–1134.) The
Ninth Circuit rejected the manufacturer’s argument that the
arbitration provisions’ delegation clauses, which “expressly
provide[d] that the arbitrator shall decide issues of
interpretation, scope, and applicability of the arbitration
provision,” deprived the district court of the authority to decide
whether the nonsignatory manufacturer could compel the
plaintiffs to arbitration. (Id. at pp. 1126–1128.) The court
explained that the arbitration provisions did “not contain clear
and unmistakable evidence” that the plaintiffs and the
manufacturer agreed to arbitrate arbitrability. (Id. at p. 1127.)
Although the plaintiffs may have agreed to arbitrate arbitrability
with the dealerships, the terms of the arbitration provisions “are
expressly limited to Plaintiffs and the Dealerships.” (Ibid.) For
instance, the provisions stated that “ ‘[e]ither you [i.e., a plaintiff]
or we [i.e., a dealership] may choose to have any dispute between
you and us decided by arbitration.’ ” (Ibid.) According to the
court, the language of the arbitration provisions showed the
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plaintiffs intended “to arbitrate arbitrability with the
[d]ealerships and no one else.” (Ibid.)
Like the agreements at issue in Kramer, Instacart’s
arbitration provision is expressly limited to disputes between
Zaghi and Instacart. Instacart’s arbitration provision does not
state that it is enforceable by third parties or that it applies to
disputes involving third parties. Nor do any other sections of
Instacart’s Terms of Service indicate that Zaghi agreed to
arbitrate any disputes related to her use of Instacart’s online
shopping platform or the interpretation of the Terms of Service
with third parties. Instacart’s arbitration provision, therefore,
does not contain “clear and unmistakable” language showing
Zaghi agreed to arbitrate disputes with Ralphs over the
arbitrability of her claims against the grocery store. (Kramer,
supra, 705 F.3d at p. 1127.) Since the parties to this dispute—i.e.,
Zaghi and Ralphs—did not agree to arbitrate arbitrability, the
delegation clause in Instacart’s arbitration provision does not
control. (Id. at p. 1128; see also Benaroya, supra, 23 Cal.App.5th
at p. 469 [“ ‘The question of whether a nonsignatory is a party to
an arbitration agreement is one for the trial court in the first
instance.’ ”].)
Ralphs argues Kramer is distinguishable because “the
Ninth Circuit conditioned its holding on ‘the absence of clear and
unmistakable evidence that [the plaintiffs] agreed to arbitrate
arbitrability.’ ” Because Instacart’s arbitration provision
expressly incorporated JAMS’s rules and procedures, which were
not incorporated into the arbitration provisions in Kramer,
Ralphs insists that Zaghi “clearly and unmistakably “inten[ded]
to have the arbitrator decide gateway issues of arbitrability.”
This is a distinction without a difference. As we just discussed,
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the arbitration provisions in Kramer included their own
delegation clauses, delegating the authority to decide issues of
arbitrability, including issues over the applicability of the
provisions, to an arbitrator. (Kramer, supra, 705 F.3d at p. 1124.)
But, just as in Kramer, the key issue here is not whether the
underlying arbitration provision includes a clause delegating to
an arbitrator the authority to decide issues of arbitrability, but
rather whether the parties before the court agreed to be bound by
an arbitration provision that includes a delegation clause. That is
an issue for the court to decide. (See Henry Schein, Inc. v. Archer
& White Sales, Inc. (2019) 586 U.S. ___ [139 S.Ct. 524, 530, 202
L.Ed.2d 480] [the issue of arbitrability is for the court to decide
unless the parties’ agreement clearly and unmistakably provides
otherwise].)
In sum, because there is no clear and unmistakable
evidence that Zaghi agreed to arbitrate any disputes with Ralphs
when she accepted Instacart’s Terms of Service, the delegation
clause included in Instacart’s arbitration provision does not apply
here. The court, therefore, properly decided the question of
whether Ralphs could enforce that arbitration provision.
3. Ralphs is not a third-party beneficiary of Instacart’s
arbitration provision.
Ralphs next contends the court erred in finding the grocery
store is not a third-party beneficiary of Instacart’s arbitration
provision. Again, we disagree.
A third party may enforce a contract made expressly for its
benefit. (Civ. Code, § 1559.) To enforce a contract, the third party
must establish the following elements: (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;
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and (3) permitting the third party to enforce the contract against
a contracting party is consistent with the objectives of the
contract and the reasonable expectations of the contracting
parties. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830
(Goonewardene).) The third party “ ‘bears the burden of proving
that the promise he seeks to enforce was made to him personally
or to a class of which he is member.’ ” (Spinks v. Equity
Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004,
1024.)
A third-party beneficiary may enforce only those terms of
the contract that were made for its benefit. (Clark v. California
Ins. Guarantee Assn. (2011) 200 Cal.App.4th 391, 398.) Thus, to
compel arbitration of a dispute, the third party must show that
the arbitration provision included in the contract, and not just
some other part of that contract, was made expressly for the third
party’s benefit. (Fuentes v. TMCSF, Inc. (2018) 26 Cal.App.5th
541, 552.)
As we explained above, neither Instacart’s arbitration
provision nor any other portion of the company’s Terms of Service
requires an Instacart customer to arbitrate with third parties
disputes that might relate to the customer’s use of Instacart’s
online shopping platform. Likewise, neither the arbitration
provision nor any other portion of Instacart’s Terms of Service
suggests that a third party may invoke the arbitration provision
against an Instacart customer. Since Instacart and its customers
are the only parties mentioned in the arbitration provision and
the portions of Instacart’s Terms of Service addressing
arbitration, Ralphs hasn’t satisfied the first element of the third-
party beneficiary test—i.e., demonstrating that it would directly
benefit from Instacart’s arbitration provision. (Goonewardene,
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supra, 6 Cal.5th at p. 830; see also Ford Motor Warranty Cases
(2023) 89 Cal.App.5th 1324, 1338–1340 [where arbitration
provision is expressly limited to enumerated parties, a
nonsignatory that is not one of those enumerated parties cannot
directly benefit from that provision]; see also Ngo v. BMW of
North America, LLC (9th Cir. 2022) 23 F.4th 942, 947 [“Language
limiting the right to compel arbitration to a specific [customer]
and a specific [company] … means that extraneous third parties
may not compel arbitration.”].)
Further, the language in the arbitration provision limiting
arbitration to disputes between Instacart and its customers
suggests Instacart and Zaghi did not intend or expect a third
party to benefit from Instacart’s arbitration provision. (Martinez,
supra, 51 Cal.App.5th at p. 967 [the parties’ mutual intent is to
be ascertained solely from the contract language if that language
is clear and explicit].) Indeed, the inclusion of other provisions in
Instacart’s Terms of Service that expressly benefit third-party
retailers like Ralphs, such as the release of claims and limitation
of liability clauses, shows that Instacart and Zaghi knew how to
create promises that expressly benefit third parties. The omission
of such language in Instacart’s arbitration provision and other
portions of the company’s Terms of Service discussing arbitration
shows Instacart and Zaghi did not intend or expect the
arbitration provision to apply to third parties. (See Ford Motor
Warranty Cases, supra, 89 Cal.App.5th at p. 1339 [the signatories
easily could have articulated an intent to benefit the
nonsignatory by naming the nonsignatory as a person entitled to
compel arbitration]; see also White v. Western Title Ins. Co. (1985)
40 Cal.3d 870, 881–882, fn. 4 [contracting parties’ mention of one
thing is the exclusion of another].)
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For the foregoing reasons, Ralphs is not a third-party
beneficiary of the arbitration provision in Instacart’s Terms of
Service. The court, therefore, properly denied Ralphs’s motion to
compel arbitration.5
DISPOSITION
The order denying Ralphs’s motion to compel arbitration is
affirmed. Zaghi shall recover her costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, Acting P. J.
WE CONCUR:
EGERTON, J.
HEIDEL, J.*
5In light of this conclusion, we need not address Ralphs’s claim that
the court erred in denying arbitration on the alternative ground that
Zaghi’s claims against the grocery store do not fall within the scope of
Instacart’s arbitration provision.
* Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
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