Judge: Andrew E. Cooper, Case: 22CHCV01438, Date: 2023-09-19 Tentative Ruling

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Case Number: 22CHCV01438    Hearing Date: September 19, 2023    Dept: F51

MOTION TO COMPEL ARBITRATION

Motion filed: 6/15/23

MOVING PARTY: Defendant Nissan North America, Inc. (“Defendant”)

RESPONDING PARTY: Plaintiff Luis Hernandez Jimenez (“Plaintiff”)

NOTICE: NOT OK (No notice filed) 

RELIEF REQUESTED: An order: (1) compelling Plaintiff to submit his claims to arbitration; and (2) staying this action pending the outcome of the arbitration.

TENTATIVE RULING: The motion is denied.

REQUEST FOR JUDICIAL NOTICE: Defendant’s request for judicial notice is granted as to Exhibits 1 and 4, and denied as to Exhibits 2 and 3.

BACKGROUND

Plaintiff brings this action under the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.) for a vehicle he purchased on or around 1/4/22, for which Defendant issued the manufacturer’s express warranty. (Compl. ¶¶ 2, 6.) Plaintiffs allege that “defects, malfunctions, misadjustments, and/or nonconformities with Plaintiff’s Vehicle include the following: an AVM unit replacement, a faulty blind spot monitor, recall R22A7, TCM reprogram recall, an illuminated front froward collision light, headlight and dashboard lights turning off for a couple seconds, a lack of power, and the vehicle intermittently stopping on its own,” but “Manufacturer or its representatives failed to conform the Vehicle to the applicable warranties because said defects, malfunctions, misadjustments, and/or nonconformities continue to exist even after a reasonable number of attempts to repair was given.” (Id. at ¶¶ 11, 13.)

On 12/19/22, Plaintiff filed his complaint, alleging against Defendant the following causes of action: (1) Breach of Implied Warranty of Merchantability under the Song-Beverly Warranty Act; and (2) Breach of Express Warranty under the Song-Beverly Warranty Act. On 1/19/23, Defendant filed its answer.

On 6/15/23, Defendant filed the instant motion to compel arbitration and request for judicial notice. On 9/1/23, Plaintiff filed his opposition. On 9/12/23, Defendant filed its reply.

ANALYSIS

Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc. § 1281.2.) This is usually done by presenting a copy of the signed, written agreement to the court. “A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330.)

The moving party must also establish the other party’s refusal to arbitrate the controversy. (Code of Civ. Proc. § 1281.2.) The filing of a lawsuit against the moving party for a controversy clearly within the scope of the arbitration agreement affirmatively establishes the other party’s refusal to arbitrate the controversy. (Hyundai Amco America, Inc. v. S3H, Inc. (2014) 232 Cal.App.4th 572, 577.)

Here, the issue presented is whether Defendant, as the nonsignatory manufacturer of the subject vehicle, may invoke the arbitration provision in a contract of sale entered between Plaintiffs and the selling dealership, a nonparty to the instant action.

A.    Retail Installment Sales Contract

Here, the parties do not dispute the existence of a written agreement containing an arbitration provision. The subject contract of sale (the “RISC”) itself, a copy of which Defendant has attached to its moving papers, provides the terms for the financing of the vehicle purchase, and includes an arbitration clause at the end of the agreement.

Admissibility

As a preliminary matter, Plaintiff objects to the copy of the RISC proffered by Defendant as inadmissible on the following grounds: lack of personal knowledge, lack of foundation, and speculation. (Pl.’s Evid. Obj.) Plaintiffs argue that therefore, “as NNA is unable to prove that any arbitration agreement exists whatsoever, much less one such agreement that NNA is party to, NNA’s motion fails and must be denied.” (Pl.’s Opp. 5:17–19.)

As Defendant argues in reply, the California Rules of Court require only that the arbitration provision of a purported agreement “be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330.) “For this step, it is not necessary to follow the normal procedures of document authentication ... If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 [internal quotations and citations omitted].)

Here, the Court finds it sufficient that Defendant has attached a copy of the purported RISC to its moving papers, of which Plaintiff does not dispute the existence nor validity. Accordingly, the Court declines to rule on Plaintiff’s evidentiary objections, and finds that Defendant has met its initial prima facie burden to show that a valid agreement to arbitrate exists.

Scope of Agreement

The arbitration provision in the RISC provides, in relevant part: “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 … purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign the contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.” (Ex. 3 to Def.’s RJN, p. 7 [emphasis added].)

Defendant asserts that “Plaintiff’s claim for breach of express warranty arises from and relates to these types of disputes.” (Def.’s Mot. 6:2–3.) Here, Plaintiff alleges, inter alia, that “along with the sale of the Vehicle, Plaintiff received written warranties and other express and implied warranties,” and that “the acts and/or omissions of Defendants, and each of them, in failing to perform the proper repairs, part replacements, and/or adjustments, to conform the Vehicle to the applicable express warranties constitute a breach of the express warranties that the Manufacturer provided to Plaintiff, thereby breaching Defendants’ obligations under Song-Beverly.” (Compl. ¶¶ 8, 29.)

Based on the foregoing, the Court finds that Defendant has met its initial burden to establish the existence of a written agreement that would provide for the arbitration of Plaintiff’s asserted claims. However, to invoke the arbitration agreement, Defendant must also establish a basis allowing it to enforce the agreement as a nonsignatory to the RISC.

B.     Nonsignatory Standing

Here, the agreement is executed solely between Plaintiff and nonparty Nissan of Mission Hills. The right to arbitration may generally only be invoked by parties to the purported arbitration agreement. (Code of Civ. Proc. § 1281.2.) Here, Defendant argues that it may nevertheless enforce the arbitration agreement of the RISC under the theory of equitable estoppel.

The parties disagree on whether this Court should rule in accordance with Felisilda v. FCA US LLC¿(2020) 53 Cal.App.5th 486, or the recently decided Ochoa v. Ford Motor Company (2023) 89 Cal.App.5th 1324. Both Felisilda and Ochoa discuss a nonsignatory vehicle manufacturer’s right to invoke the arbitration provision of a sales contract entered between a plaintiff buyer and a nonparty dealership.

In Felisilda, the Third District Court of Appeal found that the plaintiffs’ agreement to the sales contract constituted express consent to arbitrate their claims regarding the vehicle’s condition, even against third parties, as the agreement unambiguously included “an express extension of arbitration to claims involving third parties that relate to the vehicle's condition.” (53 Cal.App.5th at 498.)

In Ochoa, the Second District Court of Appeal declined to follow Felisilda, and instead found that the nonsignatory manufacturer did not have the right to compel the plaintiffs’ claims to arbitration under either theory of equitable estoppel or third-party beneficiary standing.

Under the doctrine of stare decisis, superior courts are bound by all published decisions of the Court of Appeal, but where there is a split in authority, the superior court may choose which appellate decision to follow. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456.) Here, this Court elects to follow the Second District Court of Appeal’s reasoning in Ochoa, for the reasons set forth below.

Equitable Estoppel

The doctrine of equitable estoppel allows for a nonsignatory party to compel arbitration “when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations.” (Felisilda, 53 Cal.App.5th at 495–496; JSM Tuscany, LLC v. Superior Court¿(2011) 193 Cal.App.4th 1222, 1237; Goldman¿v. KPMG, LLP¿(2009) 173 Cal.App.4th 209, 217–218; Crowley Maritime Corp. v. Boston Old Colony Ins. Co.¿(2008) 158 Cal.App.4th 1061, 1070 [Under equitable estoppel, a party cannot avoid participation in arbitration, where the party received “a¿direct¿benefit under¿the contract containing an arbitration clause…”]; Boucher¿v. Alliance Title Co, Inc.¿(2005) 127 Cal.App.4th 262, 271.)

Here, Defendant argues that “Plaintiff is bound to arbitrate by equitable estoppel because his allegations are intimately founded in and intertwined with the Sales Contract giving rise to his claims.” (Def.’s Mot. 7:8–9.) Defendant further asserts that “Plaintiff alleges that Nissan violated warranties he received with his Sales Contract because Plaintiff’s breach of express warranty claim relates to the condition of the Subject Vehicle purchased pursuant to the Sales Contract and the warranties that Plaintiff received pursuant to the purchase.” (Id. at 8:8–11.)

The Court notes that the arbitration provision in the instant action is identical to that in Felisilda, which includes a provision extending the scope of the agreement to claims involving third parties. (Ex. 3 to Def.’s RJN, p. 7.) Plaintiff, in opposition, nevertheless seeks to distinguish Felisilda and the number of cases enforcing an arbitration clause by a third party, instead characterizing the instant sales contract as a mere financing agreement that is separate and distinct from the manufacturer’s warranties. (Pls.’ Opp. 12:16–17.) Plaintiff further argues that Defendant cannot invoke the arbitration provision of an agreement that Plaintiff does not seek to enforce through the instant action. (Id. at 13:7–10 “NNA points to no actual connection between Plaintiff’s claims and any duty, obligation, term, or condition imposed by the RISC, so it cannot compel arbitration on an equitable estoppel theory.”)

The Ochoa court, in accordance with Plaintiffs’ argument, found that equitable estoppel would apply where plaintiffs had sued defendant based on a breach of the terms of the sale contract; however, this was not the case in Ochoa. (89 Cal.App.5th at 1335.) The Ochoa court ultimately found that “manufacturer vehicle warranties that accompany the sale of motor vehicles without regard to the terms of the sale contract between the purchaser and the dealer are independent of the sale contract.” (Id. at 1334.)

The Ochoa court proceeded to distinguish Felisilda by reading the “third party” language in the arbitration provision “as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate” rather than the parties’ consent to arbitrate claims with nonsignatories to the agreement. (Id. at 1334–1335 [emphasis in original].) Ultimately, the Ochoa court found that the plaintiffs’ claims did not rely on the sales contracts with the dealership, and therefore equitable estoppel did not apply. (Id. at 1336.)

Defendant urges the Court to use its discretion to follow Felisilda instead of Ochoa, arguing that the Ochoa court relied on cases which predate both the UCC and the Song-Beverly Consumer Warranty Act, and since the enactment of those laws, “California courts … have consistently recognized that manufacturer express warranties are part of what consumers purchase when entering into sales contracts.” (Def.’s Mot. 10:22–23, 11:21–23.)

Notwithstanding Defendant’s arguments, the Court exercises its discretion to follow the Court of Appeal’s holding in Ochoa, particularly where here, as in Ochoa, “the sale contracts include no warranty, nor any assurance regarding the quality of the vehicle sold, nor any promise of repairs or other remedies in the event problems arise,” and Plaintiff does not otherwise allege any violation of the RISC’s express terms. (Id. at 1335.)

Based on the foregoing, the Court finds that Plaintiff’s claims against Defendant concern the express manufacturer warranty issued by Defendant, which is independent of and not “intimately founded in and intertwined with” the RISC. Accordingly, equitable estoppel does not apply to allow Defendant to compel arbitration of Plaintiff’s claims.

CONCLUSION

The motion is denied.