Judge: Anne Richardson, Case: 21STCV18717, Date: 2023-08-16 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 21STCV18717    Hearing Date: August 16, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiffs Jorge Hernandez Camacho and Sara Martinez bring this lemon law suit against Toyota Motor Sales U.S.A., Inc. (Toyota USA) based on Toyota USA’s failure to repurchase, replace, or repair a 2019 Toyota Corolla (Subject Vehicle) purchased by the Plaintiffs from nonparty dealership Longo Toyota, subject to express and implied warranties from Toyota USA, and which manifested defects and nonconformities after purchase, that Toyota USA was unable to repair after a reasonable number of attempts, resulting in three claims for breach of express or implied warranties under the California Song-Beverly Consumer Warranty Act (SBA).

On May 4, 2022, Toyota USA moved to compel arbitration in this action pursuant to an arbitration clause contained in the sales contract for the Subject Vehicle, executed by Plaintiffs and non-party Longo Toyota. Plaintiffs opposed the motion on July 7, 2022 and Toyota USA replied on July 13, 2022.

On July 20, 2022, the Court granted the motion to compel arbitration on the grounds that, pursuant to Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486, Toyota USA had standing to invoke the arbitration clause in the sales contract for the Subject Vehicle through the doctrine of equitable estoppel, such that there was an agreement to arbitrate between the parties that covered the claims in this action, and for which no valid defenses against enforcement existed.

On July 18, 2023, Plaintiffs moved for reconsideration of the Court’s July 20, 2022 order based on new law—Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324, review granted Jul. 19, 2023, S279969 [532 P.3d 270] (Ochoa) and Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958 (Montemayor)—in which the court of appeal distinguished Felisilda from circumstances where a non-signatory manufacturer attempts to invoke the arbitration agreement contained in a sales contract between a purchaser and a non-party dealership.

Toyota USA filed an opposition to this motion on August 10, 2023, only four court days before the hearing instead of the requisite nine. In the declaration of Stefanie Jo accompanying the opposition, counsel state that the Opposition was filed late to an “inadvertent distribution error” that did not distribute the moving papers to the appropriate firm employees. (Jo Decl. at ¶¶ 3-4.) The Court accepts the representation and will consider the late-filed document.

Plaintiff’s motion for reconsideration is now before the Court.

Motion for Reconsideration

I.

Timeliness

When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. (Code Civ. Proc., § 1008, subd. (a).)

“A change in the law is always an appropriate basis, up until a final judgment is entered, for changing an interim order; courts retain the inherent power, regardless of Code of Civil Procedure section 1008, to change their orders at any time prior to entry of judgment.” (Blake v. Ecker (2001) 93 Cal.App.4th 728, 739 (Blake), disapproved on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094, 1108 & fn. 5 (Le Francois).) “[T]he 10-day time limitation of section 1008 has no bearing on the trial court’s jurisdiction” to vacate an order made over a year earlier based on a change in law. (Blake, supra, at pp. 738-739, fn. 10.) “[T]he fact that a party brings the basis for such a change to the court’s attention, even if via a motion for reconsideration pursuant to section 1008, and even if such motion is made after the 10[-]day period, does not negate this inherent power.” (Id.; see also In re Marriage of Barthhold (2008) 158 Cal.App.4th 1301, 1309 [filing a motion for reconsideration in violation of statutes does not bar reconsideration on court’s own motion].)

Here, the Court determines that there is no timeliness bar to this Court’s reconsideration of its July 20, 2022 order based on Plaintiffs’ motion because the motion is based on new law.

II.

Legal Standard

A motion for reconsideration is used to ask the court to modify, amend, or revoke its earlier order on a prior motion to the court because of new or different facts, circumstances, or law. (Code Civ. Proc., § 1008, subd. (a).) Such an order may involve an interim or final order (see Code Civ. Proc., § 1008, subds. (e), (h)), where an interim order is an intermediate ruling of some kind that requires further proceedings before the suit can be resolved, and where a final order is an order that finally disposes of the suit (see People v. DeLouize (2004) 32 Cal.4th 1223, 1231 [differentiating between interim and final orders]).

A motion for reconsideration may be brought by a party or by the court on its own motion. (See Code Civ. Proc., § 1008, subds. (a), (c).) The grounds for the motion vary depending on whether a party or the Court is making the motion. (See Code Civ. Proc., § 1008, subds. (a), (c), (e).)

A party may move for reconsideration based on: (1) new or different facts, (Code Civ. Proc., § 1008, subd. (a); see e.g., In re Marriage of LaMoure (2013) 221 Cal.App.4th 1463, 1473 [reconsideration motion granted on new evidence]); (2) new or different circumstances, (Code Civ. Proc., § 1008, subd. (a)); and (3) new or different law, (Code Civ. Proc., § 1008, subd. (a); Baldwin v. Home Sav. of Am. (1997) 59 Cal.App.4th 1192, 1196.) However, a party cannot move for reconsideration based on the court’s erroneous order, i.e., the court’s misinterpretation of facts or law. (See Jones v. P.S. Dev. Co. (2008) 166 Cal.App.4th 707, 724, disapproved on other grounds by Reid v. Google, Inc. (2010) 50 Cal.4th 512, 531-532, 532 n. 4; Gilbert v. AC Transit (1995) 32 Cal.App.4th 1494, 1500.) Instead, a party can suggest to the court that it should reconsider its erroneous order on its own motion so long as the suggestion is not made ex parte. (Le Francois, supra, 35 Cal.4th at p. 1108; see e.g., In re Marriage of Spector (2018) 24 Cal.App.5th 201, 214-15 [emails husband sent to court about erroneous order were not ex parte because wife was copied on all emails].)

By contrast, the Court has statutory authority to reconsider final orders and interim orders based on a change in law. (Civ. Proc., § 1008, subds. (c), (e).)

Further, California courts have a broad constitutional authority to reconsider interim orders that are erroneous that goes beyond Code of Civil Procedure section 1008. (Brown, Winfield & Canzoneri, Inc. v. Superior Court (2010) 47 Cal.4th 1233, 1248 [courts have constitutional authority to reconsider interim orders]; Le Francois, supra, 35 Cal.4th at p. 1108 [“If a court believes one of its prior interim orders was erroneous, it should be able to correct that error no matter how it came to acquire that belief”]; In re Marriage of Barthold (2008) 158 Cal.App.4th 1301, 1308 [“Le Francois simply requires that the trial court reconsider a prior ruling based on its own realization that the ruling was erroneous, and not based upon a determination that [an improper] motion to reconsider should itself be granted on its merits”]; see, e.g., Loeb v. County of San Diego (2019) 43 Cal.App.5th 421, 425-30 [after denying county’s initial and renewed motions for summary judgment based on “trail immunity” defense, trial court did not grant an improper motion for reconsideration—with no new evidence or law—when it considered county’s subsequent motion in limine and proposed verdict form on the defense because the court had discretionary authority to refine its legal reasoning after hearing extensive legal argument and taking a brief recess to review relevant authorities]; Minick v. City of Petaluma (2016) 3 Cal.App.5th 15, 34 [“[t]rial courts always have discretion to revisit interim orders in service of the paramount goal of fair and accurate decision making”].)

The fact that this reconsideration is triggered by plaintiff’s motion does not prevent this Court from ruling on it. Whether the trial court had an “unprovoked flash of understanding in the middle of the night or is prompted to rethink an issue by the stimulus of a motion is ‘constitutionally immaterial’ . . . . Thus, the fact that plaintiff brought the change in the law to the court’s attention more than 10 days after entry of the order she sought to change is irrelevant.” (Blake, 93 Cal.App.4th at p. 739, fn. 10.)

Case law suggests that while California courts generally do not possess a constitutional authority to reconsider erroneous final orders, a court may correct an error in legal reasoning as to a final order subject to appeal but before the time to appeal has expired. (See e.g., In re Marriage of Spector, supra, 24 Cal.App.5th at p. 215; In re Marriage of Barthold, supra, 158 Cal.App.4th at pp. 1312-1313, 1313, fn. 9.)

However, one judge cannot “correct” a decision made by another judge even if convinced it is erroneous, except as specifically permitted by statute. (See Greene v. State Farm Fire & Cas. Co. (1990) 224 Cal.App.3d 1583, 1588-1589 (Greene) [judge inappropriately vacated a general order made by the superior court where judge was not so empowered to act under any statute].)

III.

Grounds for Reconsideration

Here, the Court initially notes that the ‘new law’ portion of Code of Civil Procedure section 1008 is the statute that allows this judicial officer to reconsider Judge David Sotelo’s (Ret.) July 20, 2022 order regarding Toyota USA’s motion to compel arbitration in this action. (See Greene, supra, 224 Cal.App.3d at pp. 1588-1589.)

In their motion, Plaintiffs argue that Toyota USA’s motion to compel arbitration—which Department 40 granted on July 20, 2022—was based partly on the ground that Felisilda was the controlling authority on whether a nonsignatory to a vehicle’s sales contract could invoke an arbitration clause in the sales contract, which warrants reconsideration based on new precedent in Ochoa and Montemayor. (Mot., p. 2.)

In their opposition, Toyota USC argue that this motion is untimely, that the decision in Ochoa is erroneous, and that this Court should not reconsider its ruling both because Felisilda was correctly decided and is not substantively distinguishable from the instant case.

The Court agrees with Plaintiffs, as explained below.

IV.

Equitable Estoppel

In its July 20, 2022 order, the Court granted Toyota USA’s motion to compel arbitration on the grounds that “Toyota USA (1) derives its standing to enforce the relevant Arbitration Agreement under precedent in Felisilda …, (2) has invoked the Arbitration Agreement against … Plaintiffs, and (3) … Plaintiffs … failed to present valid defenses against the Arbitration Agreement’s enforceability.” (7/20/22 Minutes, p. 1.)

Based on Ochoa’s persuasive value and Montemayor’s reasoning, the Court now disagrees with the first of the three parts in the Court’s July 20, 2023 conclusion.

Under the doctrine of equitable estoppel, “a nonsignatory defendant may invoke an arbitration clause 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.) The doctrine applies in either of two circumstances: (1) when the signatory must rely on the terms of the written agreement containing the arbitration clause in asserting its claims against the nonsignatory or (2) when the signatory alleges “substantially interdependent and concerted misconduct” by the nonsignatory against a signatory and the alleged misconduct is “founded in or intimately connected with the obligations of the underlying agreement.” (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 218-219.) At bottom, “the linchpin for equitable estoppel is equity—fairness.” (Id. at p. 220.) A nonsignatory seeking to enforce an arbitration agreement has the burden to establish at least one of these circumstances applies. (Jones v. Jacobson (2011) 195 Cal.App.4th 1, 16.)

Toyota USA argued that despite Toyota USA itself not being a signatory to that agreement, it had standing to enforce the arbitration agreement between Longo Toyota and the Plaintiffs based on the doctrine of equitable estoppel as interpreted in Felisilda. (5/4/22 Mot., pp. 6-7.)

In Ochoa—cited only for its persuasive value—the court of appeal found that claims by a signatory vehicle purchaser against the vehicle’s manufacturer did not arise from the sales contract for the purchase of the vehicle because the claims did not rely on the sales contract insofar as “[t]he sale contracts include[d] no warranty, nor any assurance regarding the quality of the vehicle sold, nor any promise of repairs or other remedies in the event problems ar[o]se” and where “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale[s] contract as part of the sale[s] contract.” (Ochoa, supra, 89 Cal.App.5th at pp. 1335-1336.)

Similarly, here, the claims raised in the Complaint arise from the SBA, not the purchase agreement for the sale of the Subject Vehicle. (See Complaint, ¶¶ 14-20, 26-34, 39-44.)

This reasoning is in line with Montemayor, where the court of appeal found that the plaintiffs’ claims there were not inextricably intertwined with the vehicle’s sales contract as to permit the non-signatory manufacturer to invoke the arbitration clause therein through the doctrine of equitable estoppel. (Montemayor, supra, 92 Cal.App.5th at p. 970.) The court reasoned that “the fact the [plaintiffs] purchased the defective vehicle from [a signatory dealer] pursuant to the sales contract, and as a result of their purchase … received separate express warranties from [the non-signatory manufacturer], d[id] not mean their causes of action against [the manufacturer] based on those express warranties [we]re founded in the sales contract.” (Ibid.)

Separately, the Court notes that the circumstances in Felisilda differed from those before this Court and before the Courts in Ochoa and Montemayor, where this difference is critical to understanding the Court’s reconsideration. In Felisilda, the plaintiffs purchased an automobile pursuant to a sales contract that contained an arbitration clause and later sued their vehicle’s nonsignatory manufacturer and the signatory dealership, with the dealership moving to compel arbitration, which the trial court granted, after which the plaintiffs dismissed the dealership from the action and arbitrated the action against the manufacturer, ultimately losing before the arbitrator and having judgment rendered against them thereon by the trial court, leading plaintiff to appeal on various grounds, including that the trial court erred by including the nonsignatory manufacturer in the arbitration. (Felisilda, supra, 53 Cal.App.5th at pp. 491-492, 494.) The court of appeal determined that “[b]ecause the [plaintiffs] expressly agreed to arbitrate claims arising out of the condition of the vehicle – even against third party nonsignatories to the sales contract – they [were] estopped from refusing to arbitrate their claim against [the manufacturer].” (See Id. at pp. 496-497.) However, as reasoned by the Ninth Circuit, “[i]t ma[de] a critical difference that the Felisildas … sued the dealership in addition to the manufacturer[,] … [which] does not address the situation … here, where the non-signatory manufacturer attempted to compel arbitration on its own.” (Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942, 950.)

The Court also notes that these opinions are not inconsistent insofar as “‘[t]he fundamental point’ [in Felisilda] [wa]s that a party is ‘not entitled to make use of [a contract containing an arbitration clause] as long as it worked to [his or] her advantage, then attempt to avoid its application in defining the forum in which [his or] her dispute ... should be resolved.’” (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at p. 496, quoting Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 306, 226, citation omitted.) Unlike in Felisilda, Plaintiffs here are not trying to use the arbitration provision to their advantage against one defendant (or in one forum) and simultaneously trying to avoid arbitration against another defendant (or avoid arbitration in another forum).

The Court briefly notes that Toyota USA’s May 4, 2022 motion to compel arbitration did not make other arguments for why Toyota USA had standing to enforce the arbitration clause in the sales contract for the Subject Vehicle—e.g., third party beneficiary status—for which reason the Court concludes that, based on the record, Toyota USA had no, and continues to have no, standing to move for court-ordered arbitration against Plaintiffs.

The Court does not find any of the arguments made in Toyota’s late-filed opposition to compel a different conclusion; indeed, while Toyota argues that Ochoa was wrongly decided, and while it is true that the California Supreme Court has granted review in Ochoa, Toyota fails to even mention Montemayor, the second recent case cited by Plaintiff. Montemayor comes to an identical conclusion and only reinforces this Court’s view that the prior state of the law has been significantly modified.

Hence, the Court finds sufficient grounds, based on new law, to reconsider the July 20, 2022 order and reach a different conclusion.

V.

Order Granting Reconsideration: GRANTED.

The Court finds that new law in Ochoa—cited for persuasive value—and Montemayor provide grounds for this Court to reconsider its July 20, 2022 ruling and conclude that because Plaintiff’s claims arise from the SBA, and not from the sales contract with Longo Toyota, Toyota USA had no standing to invoke the arbitration clause in the sales contract for the Subject Vehicle. 

Conclusion

Plaintiffs Jorge Hernandez Camacho and Sara Martinez’s Motion for Reconsideration is GRANTED.

The Court SETS ASIDE and VACATES the July 20, 2022 order, LIFTS THE STAY made in that same order, and RECALLS this action from arbitration. (Code Civ. Proc., § 1284.)