Durkin v. Mercedes-Benz USA LLC

Background

Carleen A Durkin filed this action against Mercedes-Benz USA LLC (MBUSA), the vehicle manufacturer, asserting two claims under California’s Song-Beverly Consumer Warranty Act. The claims arose from Durkin’s lease of a 2023 Mercedes-Benz EQB-Class from Mercedes-Benz of Marin. MBUSA removed the case from California state court to the Northern District of California and moved to compel arbitration.

The lease contained an arbitration provision covering any claim or dispute arising from or relating to the lease or any resulting transaction or relationship. The provision expressly identified MBUSA as a “Third-Party Beneficiary” and allowed such a beneficiary to elect arbitration.

Arguments

Durkin argued that MBUSA was not an intended third-party beneficiary of the lease and therefore could not enforce its arbitration provision. She also argued that MBUSA could not rely on equitable estoppel, a doctrine that can sometimes allow a nonsignatory to enforce an arbitration agreement when the claims are closely connected to the contract or involve closely related conduct.

MBUSA argued that it could compel arbitration either as an intended third-party beneficiary or under equitable estoppel.

Court’s Analysis

The court explained that, under California law, a nonsignatory may enforce an arbitration agreement as an intended third-party beneficiary if the third party benefits from the contract, the contracting parties intended to provide that benefit, and enforcement is consistent with the contract’s objectives and the parties’ reasonable expectations.

The court found that MBUSA met those requirements. The lease expressly named MBUSA as a third-party beneficiary, showed that the contracting parties intended to benefit MBUSA, and authorized MBUSA to compel arbitration of claims arising from the lease or related relationships. The court also found that Durkin’s relationship with MBUSA arose from the lease and that her claims fell within the arbitration provision’s scope.

Because the court concluded that MBUSA could enforce the arbitration agreement as an intended third-party beneficiary, it did not decide whether MBUSA could compel arbitration under equitable estoppel. The court rejected Durkin’s arguments that the arbitration provision did not benefit MBUSA and that her warranty obligations were independent of the lease.

Disposition

The court GRANTED MBUSA’s motion to compel arbitration. Durkin’s claims were STAYED pending completion of arbitration, and all dates and deadlines were vacated. The parties were ordered to file a notice and request to lift the stay within 30 days after arbitration ends. If they did not file that notice within six months of July 15, 2025, they were ordered to file a joint status report about the arbitration.