Judge Alison Mackenzie, Case Number: 22STCV17491, Date: 2023-11-09 Tentative Ruling

Judge: Alison Mackenzie, Case: 22STCV17491, Date: 2023-11-09 Tentative Ruling

Case Number: 22STCV17491 Hearing Date: November 9, 2023 Dept: 55

NATURE OF PROCEEDINGS: Plaintiff’s Motion For Reconsideration Of The Court’s Order Granting Defendant Nissan North America, Inc.’s Motion To Compel Arbitration.

Tentative: The motion is granted.

Background

The Complaint alleges that Plaintiff purchased a 2020 Nissan Sentra (the “Subject Vehicle”) from Defendant KAB Group Investments, dba Nissan of Duarte (the “Dealership”). Based on alleged defects in the Subject Vehicle, Plaintiff sued Nissan North America, Inc. (“Nissan”) under the Song-Beverly Consumer Warranty Act for breach of the express and implied warranties that Nissan furnished to Plaintiff in connection with the purchase of the Subject Vehicle.

Nissan moved to compel arbitration of Plaintiff’s Song-Beverly Act claims based on an arbitration clause in the Retail Installment Sales Contract (“Sales Contract”). Nissan argued that it can enforce the arbitration clause in the Sales Contract under the doctrine of equitable estoppel and as a third-party beneficiary of the Sales Contract. Plaintiff opposed the motion. On March 23, 2023, the Court granted Nissan’s motion, relying on the holding in Felisilda v. FCA US LLC (2020) 53 Cal.App.5 486, 496.

Plaintiff now moves for reconsideration of the Court’s March 23, 2023 order granting Defendant’s motion to compel arbitration. Defendant opposes the motion.

Legal Standard

CCP section 1008(a) provides that a party may, within 10 days of service of an order, seek reconsideration of an order “based upon new or different facts, circumstances, or law.” Section 1008(c) further provides that the Court may, at any time, reconsider a prior order if it determines there has been a change in the law. See Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107 [holding that section 1008 does “not limit the court’s ability, on its own motion, to reconsider its prior interim orders so it may correct its own errors.”]. In Kerns v. CSE Ins. Group (2003) 106 Cal.App.4th 368—a case cited favorably by the Supreme Court in Le Francois—it was explained that this inherent authority exists so that courts may “achieve substantial justice” in situations that do not fall within the technical letters of CCP § 1008.

Doctrine of Equitable Estoppel

The doctrine of equitable estoppel authorizes “a nonsignatory defendant [to] invoke an arbitration clause [in a contract] to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are intimately founded in and intertwined with the underlying contract obligations.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1237, internal quotations omitted; Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 217-218.) Prior to the Court’s March 23 order, the controlling authority on this issue in the context of a Song-Beverly Act claim was the Third District Court of Appeal decision in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486. The Court of Appeal in Felisilda held that the doctrine of equitable estoppel enabled the manufacturer of the automobile that was the subject of the plaintiffs’ Song-Beverly Act claims to enforce the arbitration clause in the sales contract between the plaintiffs and the dealership from which they purchased the vehicle.

Felisilda is no longer good law. Three months ago, in Kielar v. Superior Court (2023) 94 Cal.App.5th 614, the Third District Court of Appeal expressly repudiated Felisilda. The Court issued a preemptory writ of mandate directing the trial court in the case to vacate an order compelling arbitration of plaintiff’s Song-Beverly Act claims against the automobile manufacturer based on an arbitration clause in the purchase agreement between the plaintiff and the dealer from which the plaintiff purchased the automobile. (Id. at p. 617.) The trial court order in Kielar was premised on Felisilda’s view that the doctrine of equitable estoppel applied in this context. (Ibid.) The Third District in Kielar stated that it disagreed with Felisilda and held that the doctrine does not apply. (Id., at p. 620.)

In abandoning Felisilda, the Third District in Kielar adopted instead the rulings of Division Eight of the Second District in the Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324 (issued just weeks after this Court’s order) and Division Seven of the Second District in Montemayor v. Ford Motor Company (2023) 92 Cal.App.5th 958. (See Kielar, supra, 94 Cal.App.5th at p. 620 [discussing Ford Motor and Montemayor].) The Courts in Ford Motor and Montemayor rejected the reasoning of Felisilda and held that Song-Beverly Act claims against a non-signatory automobile manufacturer are not intimately founded in and intertwined with the obligations in the contract containing the arbitration clause between the plaintiff and the dealer from which the plaintiff purchased the automobile at issue, and therefore the manufacturer could not invoke the doctrine of equitable estoppel to enforce the arbitration clause. (Ford Motor, supra, 89 Cal.App.5th at p. 1333, 1335-1336; Montemayor, supra, 92 Cal.App.5th at pp. 969-971.)

A few weeks after Keilar was decided, the First District Court of Appeal joined the anti-Felisilda chorus. It did so in Yeh v. Superior Court (2023) 95 Cal.App.5th 264. In that case, the First District expressed agreement with the reasoning of Ford Motor, Montemayor, and Keilar and held that an automobile manufacturer’s warranties are not part of the sales contract between a buyer of the automobile and the dealer from which the buyer purchased the automobile.

With Felisilda jettisoned by the very District that issued it, there is no precedent supporting Nissan’s contention that it can avail itself of the doctrine of equitable estoppel to enforce the arbitration clause in the Sales Contract. All the precedents -- Ford Motor, Montemayor, Kielar, and Yeh -- say the opposite. Those precedents control. They render the doctrine of equitable estoppel off limits to Nissan. Given this sweeping change in the law, the Court reconsiders its prior order and now lifts the stay and denies the motion to compel arbitration.

Third Party Beneficiary Status

Nissan had also contended that it should be treated as a third-party beneficiary of the Sales Contract with the right therefore to enforce the arbitration clause in that agreement. But this argument also collides head on with precedent that is directly on point and directly to the contrary. That precedent is Montemayor and Ford Motor. The Courts in those cases rejected the pleas of an automobile manufacturer that it is a third-party beneficiary of arbitration clauses in the agreements between purchasers of the automobiles and the dealers that sold the automobiles.

The test for determining if a non-party to a contract is a third-party beneficiary of the contract is whether (1) the third party actually would benefit from the contract; (2) a motivating purpose of the parties to the contract was to benefit the third party; and (3) allowing a third party to sue one of the parties for breach of contract is consistent with the expectations of the parties. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830). Applying that test and stopping after the second prong, the Courts in Montemayor and Ford Motor held that nothing in the sales agreements between the purchasers and the dealers directly benefited Ford and there was nothing in the agreements evincing an intent by the parties to benefit Ford. (Montemayor, supra, 92 Cal.App.5th at pp. 973-974; Ford Motor, supra, 89 Cal.App.5th at p. 1338.) The same is true of the Sales Contract here.

In sum, Montemayor and Ford Motor compel the conclusion that third-party beneficiary status is not a hook for enforcement by Nissan of the arbitration clause in the Sales Contract.

Conclusion

The Court therefore grants the motion for reconsideration. The Court lifts the stay it issued on March 23, 2023 and denies the motion to compel arbitration.