Hagenbaugh et al v. Nissan North America et al

Filing 109

MEMORANDUM (Order to follow as separate docket entry) Signed by Honorable Malachy E Mannion on 1/23/23. (ao)

Case 3:20-cv-01838-MEM Document 109 Filed 01/23/23 Page 1 of 23

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
DAVID HAGENBAUGH, et al.,
individually and on behalf of all
others similarly situated,
Plaintiffs
v.
NISSAN NORTH AMERICA d/b/a
NISSAN USA, et al.,
Defendants

:
:
:

CIVIL ACTION NO. 3:20-1838

:

(JUDGE MANNION)

:
:

MEMORANDUM
I.

FACTUAL BACKGROUND
On November 20, 2020, Plaintiffs filed an amended complaint with

attached Exhibits. (Doc. 19). Plaintiffs are three pairs of individuals (two
married couples and one father and daughter) residing in Luzerne County,
Pennsylvania. (Doc. 19, ¶¶ 1-3). Defendants are three auto manufacturers
incorporated and headquartered in other states, three limited liability
company auto dealerships incorporated in Pennsylvania, and two remaining
individual dealership owners residing in other states. 1 (Id., ¶¶ 4-12).

One of the dealership owners, Defendant Antonio D. Pierce, was
dismissed from this action with prejudice pursuant to a stipulation. (Doc. 76).
1

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Defendant manufacturers are Hyundai Motor America, (“HYUNDAI”), Kia
Motors America, (“KIA”), and Nissan North America, Inc., (“NISSAN”).
According to the amended complaint, Defendant dealerships, with
approval of Defendant manufacturers and owners, advertised a “Set for Life
Program” which represented that vehicle purchasers would receive certain
benefits, including engine warranties, oil and filter changes, car washes,
loaner vehicles, and state inspections, free for the duration of their ownership
of the vehicle. (Id., ¶ 20). Amid financial difficulties, Defendant dealerships
sold numerous vehicles without repaying the financing for those vehicles to
certain manufacturer-affiliated financing entities, while still advertising the
Set for Life Program benefits to purchasers. (Id., ¶¶ 16, 24). The Defendant
dealerships went out of business in November of 2018, about two years after
opening. (Id., ¶ 25). Since the dealership closures, Defendant manufacturers
have refused customers’ demands to provide them with the Set for Life
Program benefits. (Id., ¶¶ 25-27).
Each pair of Plaintiffs purchased a vehicle from one of the Defendant
dealerships and each either signed an agreement with the dealership upon
purchase specifying the benefits of the Set for Life Program or was provided
a brochure upon purchase specifying the benefits. (Id., ¶¶ 28, 32, 37). After
the dealerships closed, Plaintiffs demanded that Defendant manufacturers
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continue to provide the Set for Life Program benefits on behalf of the closed
dealerships they had authorized, and Defendant manufacturers refused. (Id.,
¶¶ 31, 36, 40).

II.

PROCEDURAL BACKGROUND
Plaintiffs, on behalf of those similarly situated, brought this putative

class action against Defendants in the Luzerne County Court. (Doc. 1-2).
Included among Plaintiffs’ putative class are “[a]ll individuals located within
and/or residents of the Commonwealth of Pennsylvania, who purchased or
leased automobiles” at the Defendant dealerships between November 1,
2016, and November 30, 2018. (Id., ¶ 42a.) In their complaint, Plaintiffs raise
four causes of action and allege violations of the Pennsylvania Unfair Trade
Practices and Consumer Protection Law (“UTPCPL”) (73 P.S. §201-1, et
seq.), (Count I), breach of contract, (Count II), unjust enrichment, (Count III),
and fraud, (Count IV). (Doc. 1-2, ¶¶ 54, 64, 69, 74-80). With respect to
Defendant manufacturers, Plaintiffs allege that they are liable under agency
theories, contract, and fraud for misrepresenting that they would guarantee
the benefits in the Set for Life Program if Defendant dealerships failed to
honor them.

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Defendants removed this case on October 7, 2020, averring that this
court has diversity jurisdiction pursuant to 28 U.S.C. §1332(a) or,
alternatively, jurisdiction under §1332(d), i.e., the Class Action Fairness Act
of 2005 (“CAFA”). (Doc. 1-2, ¶¶1-2, 32-34). On November 3, 2020, Plaintiffs
filed a motion to remand this case back to state court, (Doc. 6), which
Plaintiffs ultimately withdrew on June 2, 2022, (Doc. 87), after the court had
ordered the parties to conduct additional discovery regarding the citizenship
of the Defendant Dealership for jurisdictional purposes, (Doc. 86). 2
On January 4, 2021, two Defendants who manufactured some of the
vehicles at issue, HYUNDAI and KIA, filed a motion to dismiss plaintiffs’
amended complaint pursuant to Rule 12(b)(6), (Doc. 43). Also, on January
4, 2021, NISSAN and HYUNDAI filed a motion to compel arbitration and stay
litigation, (Doc. 44), pursuant to Plaintiffs’ written arbitration agreements and

Even though the Plaintiffs withdrew their remand motion, the court
must still have subject matter jurisdiction to hear this case. See 28 U.S.C. §
1447(c) (“If at any time before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be remanded.”); Liberty Mut.
Ins. Co. v. Ward Trucking Corp., 48 F.3d 742, 750 (3d Cir. 1995) (“[Section
1447(c)] allows and indeed compels a district court to address the question
of jurisdiction, even if the parties do not raise the issue.”). Having reviewed
the motion to remand and accompanying filings, and the Defendants’
supplemental briefing on the jurisdictional issue, (Doc. 89), the court is
satisfied that it has subject matter jurisdiction pursuant to 28 U.S.C.
§1332(a), (d).
2

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the Federal Arbitration Act (the “FAA”), 9 U.S.C. §1, et seq. 3 NISSAN and
HYUNDAI attached Exhibits to their motion to compel. Defendant
manufacturers filed their briefs in support of both motions on January 15,
2021. (Docs. 52 & 53). Plaintiffs filed their briefs in opposition to Defendant
manufacturers’ motions on February 8, 2021, with Exhibits attached. (Docs.
61 & 62). On March 4, 2021, Defendant manufacturers filed their reply briefs
in support of their motions. (Docs. 69 & 70).
For the reasons that follow, NISSAN and HYUNDAI’s motion to compel
arbitration and stay litigation will be GRANTED. The court will SEVER the
proceedings in this case as to all claims against NISSAN and HYUNDAI
pending arbitration pursuant to §3 of the Federal Arbitration Act (“FAA”), 9
U.S.C. §3. This case is not stayed and will PROCEED with respect to the
claims of the Plaintiffs who bought Kia vehicles asserted against Defendant
manufacturer KIA. In light of the severance, KIA and HYUNDAI’s joint motion
to dismiss Plaintiffs’ amended complaint (Doc. 45) will be DISMISSED

The third of the Defendant manufacturers, KIA, did not join in the
motion to compel arbitration since the sales contract regarding the two
Plaintiffs who bought Kia vehicles did not contain an arbitration agreement.
3

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without prejudice to filing separate motions and briefs in the appropriate
forum.4
III.

STANDARD
“When addressing a motion to compel arbitration, a court must first

determine which standard of review to apply; to wit: either the motion to
dismiss standard under Federal Rule of Civil Procedure 12, or the motion for
summary judgment standard under Rule 56.” Stephenson v. AT&T Services,
Inc., 2021 WL 3603322, *2 (E.D. Pa. Aug. 12, 2021) (citing Guidotti v. Legal
Helpers Debt Resol., LLC., 716 F.3d 764, 771-72 (3d Cir. 2013)). “Where the
affirmative defense of arbitrability of claims is apparent on the face of a
complaint (or documents relied upon in the complaint), the FAA would favor
resolving a motion to compel arbitration under a motion to dismiss standard
without the inherent delay of discovery.” Id. (quoting Guidotti, 716 F.3d at
773-74) (internal citations omitted). “Where arbitrability is not apparent on
the face of the complaint, the issue should be judged under the Rule 56

“[T]he plain language of §3 affords a district court no discretion to
dismiss a case where one of the parties applies for a stay pending
arbitration.” Torres v. CleanNet, U.S.A., Inc., 90 F.Supp.3d 369, 371 n. 1
(E.D. Pa. 2015) (citing Lloyd v. HOVENSA, LLC., 369 F.3d 263, 269 (3d Cir.
2004)). “[T]he statute clearly states, without exception, that whenever suit is
brought on an arbitrable claim, the Court ‘shall’ upon application stay the
litigation until arbitration has been concluded.” Id.
4

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standard.” Id. (citing Guidotti, 716 F.3d at 773-74; Griffin v. Credit One Fin.,
2015 WL 6550618, at *2 (E.D. Pa. Oct. 29, 2015)).
In the instant case, the amended complaint and its attachments, (Docs.
19-1 & 19-2), show, on their face, that there is the existence of arbitration
agreements with respect to some of the Plaintiffs. Thus, the Rule 12(b)(6)
motion to dismiss standard will be applied in reviewing NISSAN and
HYUNDAI’s motion to compel arbitration and in determining the validity and
enforceability of the agreements “without discovery’s delay.” 5 Guidotti, 716
F.3d at 776; see also Sanford v. Bracewell & Guiliani, LLP, 618 Fed.Appx.
114, 117-18 (3d Cir. 2015) (“Because the affirmative defense of arbitrability
was therefore apparent from the face of the complaint and the documents
relied upon therein, the motion should have been reviewed under Rule
12(b)(6)[.]”) (internal quotations and citation omitted).

Plaintiffs claim they need discovery, in part, “on the issue of whether
the parties agreed to arbitrate disputes” and on the issue of “whether [they]
were deceived about any of the provisions contained in the sales
agreements.” However, there is no dispute as to the existence of the
agreements and the agreement of some Plaintiffs to arbitrate. Since Plaintiffs
submitted the sales contracts with their amended complaint, (Docs. 19-1 &
19-2), as in Stephenson, 2021 WL 3603322, at *2 n.2, the court denies
Plaintiffs’ request “to conduct limited discovery on the question of arbitrability
and finds that there is a sufficient factual record regarding arbitrability and,
therefore, no additional discovery is necessary.”
5

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Thus, the standard under Rule 12(b)(6) will be applied in this case to
the motion to compel arbitration which provides that dismissal is warranted
if, “accepting all well-pleaded allegations in the complaint as true and viewing
them in the light most favorable to the plaintiff, a court concludes that the
plaintiff failed to set forth fair notice of what the claim is and the grounds upon
which it rests.” Hite v. Lush Internet, Inc., 244 F.Supp.3d 444, 449 (D. N.J.
2017) (citation omitted). “A complaint will survive a motion to dismiss if it
contains sufficient factual matter to ‘state a claim to relief that is plausible on
its face.’” Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 173
L.Ed.2d 868 (2009)). “Although a court must accept as true all factual
allegations in a complaint, that tenet is inapplicable to legal conclusions, and
[a] pleading that offers labels and conclusions or a formulaic recitation of the
elements of a cause of action will not do.” Id. (internal quotations and citation
omitted).

IV.

DISCUSSION
Stated simply, and in viewing the factual allegations of the amended

complaint in the light most favorable to the Plaintiffs, as the court must, see
Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 772–74 (3d
Cir. 2013), Plaintiffs allege they are owed lifetime warranties and services
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regarding the vehicles they purchased from the three Defendant dealerships
that comprised the Hazleton Auto Mall. The Defendant dealerships are now
closed, and the “Set for Life Agreements” cannot be enforced against them.
As such, Plaintiffs have also sued the dealerships’ owners and the three
Defendant manufacturers. Hagenbaugh Plaintiffs purchased a Nissan
vehicle and Lubrecht Plaintiffs purchased a Hyundai vehicle. There is no
genuine dispute that the sales contracts of the stated Plaintiffs who bought
Nissan and Hyundai vehicles contained arbitration agreements that require
disputes to be resolved in an arbitration or small claims court. Nor is there
any dispute that the stated Plaintiffs signed the sales contracts. In fact,
Plaintiffs attached the contracts to their amended complaint, (Docs. 19-1 &
19-2), and referenced them in their pleading to support their breach of
contract claim. (See also Decl. of Bianca Roberts, Doc. 44-1 (Hagenbaugh
contract); Doc. 19-2, (Lubrecht contract)). Even though the court is utilizing
the motion to dismiss standard and generally may not consider matters
outside of the pleadings, here, the sale contracts can be considered since a
“document integral to or explicitly relied upon in the complaint may be
considered.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426
(3d Cir. 1997).

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Roberts avers in her Declaration, (Doc. 44-1 at 2), that when
Hagenbaugh Plaintiffs bought their Nissan vehicle, on May 4, 2017, they
signed a “Retail Installment Sale Contract – Simple Finance Charge (with
Arbitration Provision),” (Doc. 44-2).
The Hagenbaugh contract provided: “Agreement to Arbitrate: By
signing below, you agree that, pursuant to the Arbitration Provision on page
6 of this contract, you or we may elect to resolve any dispute by neutral,
binding arbitration and not by court action.” (Doc. 44-2, at 2). The Lubrecht
Contract similarly provided: “BUYER ACKNOWLEDGES THAT IF THIS BOX
IS CHECKED, THIS AGREEMENT CONTAINS AN ARBITRATION
CLAUSE.” (Doc. 19-2 at 3). The applicable box was checked and Lubrecht
then signed the agreement. Paragraph 12 of Lubrechts’ contract also
detailed the arbitration clause. (Doc. 19-2 at 4). These Plaintiffs also
acknowledged reading and accepting their contracts as well as the
arbitration agreements.
Specifically, the arbitration agreement which was contained in the
contract signed by the Hagenbaugh Plaintiffs plainly stated:
Any claim or dispute, whether in contract, tort, statute or
otherwise (including the interpretation and scope of this
Arbitration Provision, and the arbitrability of the claim or dispute),
between you and us or our employees, agents, successors or
assigns, which arises out of or relates to your credit application,
purchase or condition of this vehicle, this contract or any resulting
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transaction or relationship (including any such relationship with
third parties who do not sign this contract) shall, at
your or our election, be resolved by neutral, binding arbitration
and not by a court action.
(Doc. 44-2 at 7). Similarly, the arbitration agreement which was contained in
the contract signed by the Lubrecht Plaintiffs clearly stated:
Any claim or dispute, whether in contract, tort or otherwise
(including the interpretation and scope of this clause, and the
arbitrability of the claim or dispute), between you and us or our
employees, agents, successors or assigns, which arise out of or
relate to this Agreement or any resulting transaction or
relationship (including any such relationship with third parties
who do not sign this Agreement) shall, at your or our election, be
resolved by neutral, binding arbitration and not by a court action.
(Doc. 19-2 at 4). Based on the arbitration agreements, NISSAN and
HYUNDAI move the court to stay this case as against them and to compel
Plaintiffs to arbitrate their claims against them pursuant to the agreements.
“The FAA ‘establishes a strong federal policy in favor of compelling
arbitration over litigation.’” Stephenson, 2021 WL 3603322, at *3 (quoting
Sandvik AB v. Advent Int’l Corp., 220 F.3d 99, 104 (3d Cir. 2000)). Under §2
of the FAA, “[a] written provision in any . . . contract . . . to settle by
arbitration . . . shall be valid, irrevocable and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.” Hite,
244 F.Supp.3d at 449-50 (citing 9 U.S.C. §2); Rent–A–Center, West, Inc. v.
Jackson, 561 U.S. 63, 68 (2010). “Arbitration is ‘strictly a matter of contract,’”
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and only if a party has agreed to arbitrate, will the court be authorized to
mandate that he do so. Sanford, 618 Fed.Appx. at 117 (citing Bel–Ray Co.,
Inc. v. Chemrite (Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999)).
As the court in Stephenson explained:
[9 U.S.C. §2] “reflects the fundamental principle that arbitration
is a matter of contract.” Rent–A–Center, West, Inc. v. Jackson,
561 U.S. 63, 67 (2010). Further, §2 “places arbitration
agreements on an equal footing with other contracts and requires
courts to enforce them according to their terms.” Id. (internal
citations omitted). A “party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written
agreement for arbitration” may petition a district court “for an
order directing that such arbitration proceed in the manner
provided for in such agreement.” 9 U.S.C. §4. In hearing such a
petition, the court “must resolve ‘any doubts concerning the
scope of arbitrable issues ... in favor of arbitration.’” CardioNet,
Inc. v. Cigna Health Corp., 751 F.3d 165, 172 (3d Cir. 2014)
(quoting Moses H. Cone Mem’l Hosp., 460 U.S. at 24–25).
2021 WL 3603322, at *3. “Before compelling a party to arbitrate pursuant to
the FAA, a court must determine that (1) there is a[] [valid] agreement to
arbitrate and[,] [if so,] (2) the dispute at issue falls within the scope of that
agreement.” Hite, 244 F.Supp.3d at 450 (quoting Century Indem. Co. v.
Certain Underwriters at Lloyd’s, London, 584 F.3d 513, 523 (3d Cir. 2009)).
“Only after a court finds that an agreement to arbitrate claims exists and
covers the parties’ dispute may it compel arbitration.” Id. (citing 9 U.S.C. §4).
As to the first question, “[i]n determining whether a valid arbitration
agreement exists, courts look to ordinary state law principles of contract
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formation.” Stephenson, 2021 WL 3603322, at *3 (citing Kirleis v. Dickie,
McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009)). “Under
Pennsylvania law, ‘a contract is formed when there is an offer, an acceptance
of that offer and an exchange of consideration.’” Id. (quoting Yocca v.
Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 494 n.21 (Pa. 2004)).
Here, the arbitration agreements signed by the Hagenbaugh and
Lubrecht Plaintiffs, (Docs. 44-2 & 19-2), are in writing and indicate that they
understood the terms of the contracts and, had a clear intent to arbitrate all
disputes and claims since the contracts plainly and conspicuously indicated
that they are governed by the FAA. See id. at *4 (“An offer must be
intentional, definite in its terms and communicated[.]”) (quoting Morosetti v.
Louisiana Land & Expl. Co., 522 Pa. 492, 494 (Pa. 1989)); see also id. at *7
(holding “mutual promises to arbitrate constitute sufficient consideration.”).
As such, the court finds that the arbitration agreements are enforceable
contracts under Pennsylvania law since “(1) an offer was communicated to
Plaintiff[s], (2) Plaintiff[s] accepted that offer, and (3) the Arbitration
Agreement[s] [are] supported by consideration.” Id. at *4.
Next, the court finds that Plaintiffs’ claims against NISSAN and
HYUNDAI are within the scope of the arbitration agreements. As NISSAN
and HYUNDAI explain in their brief:
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[Plaintiffs] claim they bought their vehicles because they were
promised lifetime warranties and services they never received.
See Am. Compl. ¶¶ 50–80. That claim clearly “arises out of or
relates to” their purchase agreements or a “resulting transaction
or relationship,” including “any such relationship with third parties
who do not sign this contract . . . .” Roberts Decl., [Doc. 44-2] at
6 (Hagenbaugh Contract); Am. Compl., Ex. B [Doc. 19-2] at 3
(Lubrecht Contract) (similar). That is especially true here, as
Plaintiffs seek benefits they were allegedly promised in
exchange for buying their vehicles. See Abrams v. Chesapeake
Energy Corp., 2017 WL 6541511, at *6 (M.D. Pa. Dec. 21, 2017)
(compelling arbitration because the claims related to amounts
owed under contract containing arbitration agreement). Plaintiffs’
claims also relate to their alleged relationship with NISSAN and
HYUNDAI, which would not exist if they had not agreed to
purchase Nissan- and Hyundai-branded vehicles under these
contracts. It follows that their claims against NISSAN and
HYUNDAI are arbitrable.
(Doc. 52 at 13-14). Moreover, the arbitrator will decide if the Plaintiffs’ claims
against NISSAN and HYUNDAI are within the scope of the agreements to
arbitrate. In fact, as indicated above, the contracts Plaintiffs signed provided
that a dispute about whether a claim was within the scope of the agreement
was an issue to be decided by arbitration. See Rent-A-Center W., Inc., 561
U.S. at 68-69.
Additionally, Plaintiffs point out that NISSAN and HYUNDAI were not
signatories to the agreements. No doubt that Hagenbaugh and Lubrecht
Plaintiffs were signatories to the agreements, but NISSAN and HYUNDAI
were not. Plaintiffs argue that NISSAN and HYUNDAI cannot enforce the
agreements to arbitrate because they are not signatories to the sale
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contracts. Thus, Plaintiffs contend that the presumption of arbitrability does
not apply here, and they cite to Griswold v. Coventry First, LLC, 762 F.3d
264 (3d Cir. 2014). In response, NISSAN and HYUNDAI contend that
equitable estoppel allows them as non-signatories to enforce the arbitration
agreements against Plaintiffs.
In Torres, 90 F.Supp.3d at 379, the court explained this theory of
equitable estoppel as follows:
A non-signatory to a contract may bind a signatory to arbitrate a
dispute when “traditional principles of state law allow a contract
to be enforced by or against nonparties to the contract through
assumption, piercing the corporate veil, alter ego, incorporation
by reference, third-party beneficiary theories, waiver and
estoppel.” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631,
129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) (internal quotation
marks omitted). “In the wake of Arthur Andersen ... we must
expressly consider whether the relevant state contract law
recognizes the particular principle as a ground for enforcing
contracts [by or] against third parties.” Flintkote Co. v. Aviva PLC,
769 F.3d 215, 220 (3d Cir. 2014) (internal quotation marks
omitted). Pennsylvania law embraces the theory of equitable
estoppel. Griswold v. Coventry First LLC, 762 F.3d 264, 271 (3d
Cir. 2014) (citing Dodds v. Pulte Home Corp., 909 A.2d 348, 351
(Pa. Super. Ct. 2006)).
Thus, “equitable estoppel is a viable theory that enables a nonsignatory [such as NISSAN and HYUNDAI] to compel a signatory [i.e.,
Hagenbaugh and Lubrecht Plaintiffs] to arbitrate.” Id.; see also Sanford, 618
Fed.Appx. at 118 (“Under the FAA, arbitration provisions may be enforced
against non-signatories under the doctrine of equitable estoppel if the
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relevant state contract law recognizes [that principle] as a ground for
enforcing contracts against third parties.”) (internal quotations and citation
omitted).
“Thus, in order for equitable estoppel to apply, a non-signatory must
establish that: (1) a close relationship exists between the entities involved;
and (2) the claims against it are ‘intimately founded in and intertwined with
the underlying contractual obligations.’” Id. (citing Griswold, 762 F.3d at 272).
NISSAN and HYUNDAI contend that Plaintiffs’ claims against them are
intimately founded in and intertwined with the sale contracts that contain the
arbitration agreements since Plaintiffs claim that NISSAN and HYUNDAI,
along with the other Defendants, breached these contracts. (citing Doc. 19,
¶¶ 59–65). “Claims are intertwined with an arbitration agreement when the
signatory’s claims rely on the terms of the agreement or assume the
existence of, arise out of, or relate directly to, the written agreement.” Id.
(internal quotations and citations omitted). Here, the court finds that Plaintiffs’
breach of contract claims against NISSAN and HYUNDAI, which rely upon
the benefits of the contracts and the Set for Life program, are “founded in
and intertwined with” the obligations of the sale contracts which had the
arbitration clauses. Plaintiffs plainly rely upon the terms of the sale contracts
to allege that NISSAN and HYUNDAI are liable to them for breach the terms.
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As NISSAN and HYUNDAI point out, (Doc. 52 at 18), it would be inequitable
to allow Plaintiffs to “invoke the [sales] contracts against the Manufacturers
[with respect to their breach of contract claim] and then complain when the
Manufacturers invoke those same contracts against them.” See Sanford, 618
Fed.Appx. at 118 (holding that “[an] attempt to ‘claim the benefit of the
contract and simultaneously avoid its burdens’ is precisely the situation the
doctrine of equitable estoppel seeks to prevent.”) (citing E.I. DuPont de
Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269
F.3d 187, 200 (3d Cir. 2001)).
Additionally, as NISSAN and HYUNDAI point out in their brief:
Plaintiffs lump the Dealerships and Manufacturers together,
claiming that “Defendants” collectively committed all of the
supposed wrongdoing. See, e.g., Am. Compl. ¶ 54 (describing
“Defendants’ false and misleading representations”); id. ¶ 60
(“Defendants represented that they would provide . . . the
benefits specified in the Set for Life Program”); id. ¶ 68
(“Defendants . . . reaped . . . ill-gotten profits”). Allegations of
“collective wrongdoing” are enough in and of themselves to
trigger the equitable estoppel doctrine. See Noye, 765 F.App’x at
747 (finding a close nexus where complaint referred to
signatories and nonsignatories interchangeably); Colon v.
Conchetta, Inc., 2017 WL 2572517, at *6 (E.D. Pa. June 14,
2017) (“[I]t would be completely inequitable to disallow the nonsignatories from compelling arbitration in light of [plaintiff’s]
allegations of collective wrongdoing”); Caparra v. Maggiano’s
Inc., 2015 WL 5144030, at *8 (E.D. Pa. Sept. 1, 2015) (applying
equitable estoppel because claims against parties and
nonparties were “indistinguishable as they stem from the same
incident”).
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(Doc. 52 at 16). Thus, the court finds that equitable estoppel allows NISSAN
and HYUNDAI to enforce the arbitration agreements with respect to all of
Plaintiffs’ claims against them. See Colon v. Conchetta, Inc., 2017 WL
2572517, at *6 (holding that “[plaintiff’s] allegations of substantially
interdependent and concerted misconduct dictate that all of the Defendants
are covered under the arbitration agreement pursuant to the equitable
estoppel doctrine.”); Torres, 90 F.Supp.3d at 381 (holding that since “[a]ll of
the claims in the Complaint stem from the franchisor/franchisee relationship
established by the Franchise Agreement and thus are intimately founded in
and intertwined with the Franchise Agreement,” “equitable estoppel
empowers

[non-signatory]

Defendants

to

enforce

the

arbitration

agreement.”); see also Sanford, 618 Fed.Appx. at 118-19 (since “[Plaintiffs]
elected to proceed under a claim for breach of the [sale contracts], [they are]
bound by [their] terms, including the arbitration provision,” and “[p]rinciples
of equitable estoppel therefore mandate arbitration of [their] claims[.]).
Since the court has found that enforceable agreements to arbitrate
exist as to the Defendants, including non-signatory manufacturers NISSAN
and HYUNDAI, the court must determine whether Plaintiffs’ claims against
NISSAN and HYUNDAI are within the scope of the arbitration agreements.

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The arbitration clauses in the sale contracts require arbitration of “[a]ny
claim or dispute, whether in contract, tort, statute or otherwise (including the
interpretation and scope of this Arbitration Provision, and the arbitrability of
the claim or dispute)” shall be resolved by binding arbitration. As NISSAN
and HYUNDAI point out, (Doc. 69 at 16), in their amended complaint,
“Plaintiffs take issue not only with the Dealerships’ alleged pre-contractual
promises but also with the Manufacturers’ post-contractual refusal to fulfill
those alleged promises.” (citing Doc. 19, ¶31, “When Hazleton Nissan
ceased operations . . ., the Hagenbaughs subsequently demanded that
[NISSAN] provide the benefits specified in the Set for Life Program.
[NISSAN] refused, and continues to refuse to do so.”; Doc. 19, ¶36, similar
allegations as to HYUNDAI)). It is also clear that Plaintiffs’ claims against
NISSAN and HYUNDAI relate to matters in the sale contracts which contain
the arbitration clauses. Further, the arbitration agreements cover broad
claims, including claims that “arise[] out of” or “relate[] to” the “purchase” or
“relationship” with the Dealerships or with any “third parties who do not sign
this contract,” such as NISSAN and HYUNDAI. Thus, the court finds that

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Plaintiffs’ claims against NISSAN and HYUNDAI fall squarely within the
scope of the arbitration agreements. 6
Moreover, under the FAA, the court must “interpret the contract as
written,” Henry Schein, Inc. v. Archer and White Sales, Inc.,139 S. Ct. 524,
529 (2019), and “[w]hen the parties’ contract delegates the arbitrability
question to an arbitrator, a court may not override the contract,” and “a court
possesses no power to decide the arbitrability issue.” Id. As the court in
Robertson v. Enbridge (U.S.) Inc., 2020 WL 5754214, at *4 (W.D. Pa. Jul.
31, 2020), adopted by 2020 WL 5702419, (W.D. Pa. Sept. 24, 2020), found,
“[w]hether a particular arbitration provision may be used to compel arbitration
between a signatory and a nonsignatory is a threshold question of
arbitrability.” (citing, in part, DeAngelis v. Icon Entertainm’t Grp., 364 F.
Supp.3d 787,797 (S.D. Ohio 2019) (“Whether a nonsignatory can enforce

Since the court finds that equitable estoppel principles require the
arbitration of Plaintiffs’ claims against NISSAN and HYUNDAI, the court
need not address Defendants’ alternate argument that Plaintiffs are also
estopped from avoiding the arbitration clause under third-party beneficiary
principles. See Johnson v. Pa. Nat’l Ins. Cos., 527 Pa. 504, 594 A.2d 296,
298 (1991); E.I. DuPont, 269 F.3d at 195. Nor does the court need to address
NISSAN’s contention that it can also enforce the Hagenbaughs’ arbitration
agreement “because it extends to any ‘assigns’ of the contracts, [ ], and
because the relevant Dealership assigned certain rights under the
Hagenbaughs’ contract to NISSAN’s wholly owned subsidiary.” (citing Doc.
44-1).
6

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the arbitration agreement is a question of the enforceability of the arbitration
clause, as to that defendant.”) (string citations omitted).
In short, since the arbitration agreements in the instant case delegated
issues of arbitrability to an arbitrator, the court finds that the issue of whether
Plaintiffs must arbitrate their claims against the two non-signatory
defendants NISSAN and HYUNDAI must be decided by an arbitrator. See
id. at *5 (holding that “[i]n light of Henry Schein and the clear language of the
Arbitration Agreements, whether [defendant] may enforce the Arbitration
Agreements against Plaintiff is a question for the arbitrator.”).
Finally, “[b]ecause [] valid arbitration agreement[s] exist[] as to the
aforementioned [Plaintiffs] and covers the[ir] claims [against defendants
NISSAN and HYUNDAI], [the court] [has] no choice but to grant a motion to
compel arbitration of their claims.” O’Quinn v. TransCanada USA Services,
Inc., 469 F.Supp.3d 591, 603 (S.D. W.Va. 2020) (citation omitted). The court
also finds it appropriate to sever Plaintiffs’ claims against NISSAN and
HYUNDAI, as opposed to staying this entire case. “Courts have wide
discretion in determining when severance is appropriate.” Id. (citations
omitted). “In determining whether severance is appropriate, courts look to
factors such as, whether severance would facilitate settlement or judicial
economy ... the convenience of the parties, avoiding prejudice, promoting
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expedition and economy, and the separability of law and logic.” Id. (citations
omitted). Here, the court finds that severing and only staying the claims that
Hagenbaugh and Lubrecht Plaintiffs have against defendants NISSAN and
HYUNDAI is “in the interests of justice, judicial economy, and most fair.” See
id. Plaintiffs who bought Kia vehicles and have claims against KIA are not
subject to an arbitration agreement and their claims are not stayed and will
proceed.

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V.

CONCLUSION
Based on the foregoing, the court will GRANT the motion to compel

Hagenbaugh and Lubrecht Plaintiffs to comply with their arbitration
agreements filed by NISSAN and HYUNDAI, (Doc. 44), and the court will
SEVER and STAY the litigation only with respect to the claims against
NISSAN and HYUNDAI. See Colon v. Conchetta, Inc., 2017 WL 2572517,
at *7; O’Quinn, supra. The claims of Plaintiffs against KIA are not stayed and
will PROCEED. The joint motion to dismiss Plaintiffs’ amended complaint,
(Doc. 19), filed by HYUNDAI and KIA, (Doc. 43), will be DISMISSED without
prejudice with both parties permitted to file a separate motion to dismiss, if
it so chooses, in the appropriate forum. An appropriate Order will follow.

s/ Malachy E. Mannion

MALACHY E. MANNION
United States District Judge
DATE: January 23, 2023
20-1838-02

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