Judge Andrew E. Cooper, Case Number: 23CHCV01112, Date: 2024-04-12 Tentative Ruling

APRIL 11, 2024

Los Angeles Superior Court Case # 23CHCV01112

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

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

Plaintiff brings this action under the Song-Beverly Consumer Warranty Act (Civil Code § 1790 et seq.) for a vehicle he purchased on an unspecified date, for which Defendant issued the manufacturer’s express warranty. (Compl. ¶¶ 6–7.) Plaintiff alleges that “the vehicle was delivered to Plaintiff with serious defects and nonconformities to warranty and developed other serious defects and nonconformities to warranty including, but not limited to, various engine, transmission, and electrical defects.” (Id. at ¶ 8.)

On 4/17/23, Plaintiff filed his complaint, alleging against Defendant the following causes of action: (1) Violation of the Song-Beverly Consumer Warranty Act; and (2) Violation of the Federal Magnuson-Moss Warranty Act. On 5/22/23, Defendant filed its answer.

On 10/31/23, Defendant filed the instant motion to compel arbitration and request for judicial notice. On 3/29/24, Plaintiff filed his opposition. On 4/4/24, Defendant filed its reply.

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 into between Plaintiff and the selling dealership, a nonparty to the instant action.

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.

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 and authentication. (Pl.’s Evid. Obj. No. 2.) However, 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.

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. 4 to Decl. of Naoki Kaneko, p. 5 [emphasis added].)

Defendant asserts that “Plaintiff’s claims are … within the class of arbitrable claims under the plain language of the Arbitration Provision.” (Def.’s Mot. 7:1–2.) The Court agrees, noting that here, Plaintiff alleges, inter alia, that “defects and nonconformities to warranty manifested themselves within the applicable express warranty period” which “substantially impair the use, value and/or safety of the vehicle.” (Compl. ¶ 14.)

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, in order to invoke the arbitration agreement, Defendant must also establish a basis allowing it to enforce the agreement as a nonsignatory to the RISC.

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, review granted Jul. 19, 2023, 532 P.3d 270.[1] Both Felisilda and Ochoa discuss a nonsignatory vehicle manufacturer’s right to invoke the arbitration provision of a sales contract entered into 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.

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 it has standing to enforce the arbitration provision in the RISC because “the Sales Contract that memorialized Plaintiff’s purchase of his vehicle also gave rise to the manufacturer’s warranties on the vehicle.” (Def.’s Mot. 4:18–20.)

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. 4 to Kaneko Decl., p. 5.) 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. (Pl.’s Opp. 11:26–28.) 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 1:2–4 “Mr. Sandoval Hernandez is not trying to enforce the sales contract against defendant. Plaintiff’s claims also do not depend on the terms of the contract in any way.”)

The Ochoa court, in accordance with Plaintiff’s 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. (Def.’s Mot. 6:3–22.) However, the Ochoa court directly addressed this argument, finding that the defendant manufacturer cited to “no more recent authority establishing that manufacturer warranty obligations are implied terms in a retailer's sale contract.” (89 Cal.App.5th at 1336.)

This 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.) The Court further notes that Courts of Appeal have consistently ruled in accord with the Ochoa holding as to this issue. (See Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958, review granted Sept. 20, 2023, 535 P.3d 1; Kielar v. Superior Court of Placer County (2023) 94 Cal.App.5th 614, review granted Oct. 25, 2023, 536 P.3d 1214; Yeh v. Superior Court of Contra Costa County (2023) 95 Cal.App.5th 264, review granted Nov. 15, 2023, 537 P.3d 1151.)

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.

The Court is not requesting oral argument on this matter. Pursuant to California Rules of Court, Rule 3.1308(a)(1) notice of intent to appear is required. Unless the Court directs argument in the Tentative Ruling, no argument will be permitted unless a “party notifies all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue. “The tentative ruling will become the ruling of the court if no notice of intent to appear is received.”

Notice may be given either by email at CHAdeptF51@LACourt.org or by telephone at (818) 407-2233.

[1] “Pending review and filing of the Supreme Court's opinion, … a published opinion of a Court of Appeal in the matter has no binding or precedential effect and may be cited for potentially persuasive value only.” (Cal. Rules of Ct., rule 8.1115(e)(1).) Here, the Court cites to Ochoa as nonbinding persuasive authority.