Case Number: 22STCV11303    Hearing Date: March 17, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

MOVING PARTY:              Defendant Toyota Motor Sales, U.S.A., Inc.

OPPOSITION:                      Plaintiffs Fidel Hernandez Medina and Patricia Hernandez.

REPLY:                                 Defendant Toyota Motor Sales, U.S.A., Inc.

Background Allegations

Plaintiffs Fidel Hernandez Medina and Patricia Hernandez (“Plaintiffs”) sue Defendant Toyota Motor Sales, U.S.A., Inc. (“Toyota USA”) pursuant to three Song Beverly Consumer Warranty Act (“SBA” lemon law) claims—breach of express warranty, breach of implied warranty, and failure to repair within 30 days or a reasonable time—on the grounds that on August 23, 2021, Plaintiffs purchased a used 2019 Toyota Camry (“Subject Vehicle”) from Toyota of Lancaster, an authorized dealership of Toyota USA, subject to express warranties to Plaintiffs by which Toyota USA undertook to preserve or maintain the utility or performance of Plaintiffs’ vehicle or to provide compensation if there was a failure in such utility or performance, only for the Subject Vehicle to later develop or exhibit electrical, infotainment, fuel injection system, emissions system, and engine defects, which were not repaired by Toyota USA’s authorized dealer within a reasonable time.

On December 12, 2022, Toyota USA moved for arbitration of this action based on an arbitration agreement contained in the contract for the purchase of the Subject Vehicle, as between Plaintiffs and Toyota of Lancaster.

Plaintiffs opposed the motion on January 19, 2023, against which Toyota USA replied on March 13, 2023.

Evidentiary Objections

Toyota USA’s Evidentiary Objections on Reply

Objection No. 1: OVERRULED.

Motion to Compel Arbitration: DENIED.

Standing – Equitable Estoppel

Though Toyota USA is not expressly a party to the arbitration agreement between Toyota of Lancaster and Plaintiffs, Toyota USA argues that it may invoke the agreement’s arbitration clause based on the doctrine of equitable estoppel, as moored in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486. (Mot., 6:9-8:26.)

A litigant who is not a party to an arbitration agreement may invoke arbitration under the

Federal Arbitration Act if the relevant state contract law allows the litigant to enforce the

agreement. (Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122, 1128 [citing Arthur

Andersen LLP v. Carlisle (2009) 556 U.S. 624, 632].)

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, 218-19.) 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 argues that the principles of Felisilda—and similar principles in a federal court case, Mance v. Mercedes-Benz USA (N.D. Cal. 2012) 901 F. Supp. 2d 1147, 1155–56—apply to the instant case because there is an arbitration agreement between Plaintiffs and Toyota of Lancaster, where Plaintiff’s claims against Toyota USA arise out of the Purchase Agreement for the Subject Vehicle purchased from Toyota of Lancaster and Toyota USA’s alleged conduct is deeply intertwined with the signatory’s conduct, i.e., that “Plaintiffs’ Complaint alleges, inter alia, ‘defects and nonconformities to warranty … including, but not limited to, electrical defects, infotainment defects, fuel injection system defects, emissions system defects, [and] engine defects’ (Complaint, ¶ 28), that Plaintiffs ‘delivered the vehicle to an authorized Toyota Motor Sales, U.S.A., Inc. repair facility for repair of the nonconformities’ (Complaint, ¶ 33), and that TMS ‘was unable to conform Plaintiffs’ vehicle to the applicable express after a reasonable number of repair attempts.’ (Complaint, ¶ 34).” (Mot., 6:9-8:26.)

In opposition and relevant part, Plaintiffs argue various points, including: Mance was overturned by the Ninth Circuit in Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122; “Plaintiffs do not rely on any of the terms of the Purchase Contract in advancing their claims against Defendant”; Plaintiffs’ claims against Defendant are not intertwined with the Purchase Agreement because, like in Kramer, “the Purchase Agreement between Plaintiff and Seller expressly differentiates between warranties provided by Seller and those provided by Defendant”; and Plaintiffs’ Song-Beverly Act claims against Defendant – including their express warranty claims – are statutory, not contractual” such that “[a]lthough Plaintiffs did, of course, purchase the Subject Vehicle from Dealer, the fact of purchase alone is not sufficient to establish the close connection between agreement and claims.” (Opp’n, 3:9-4:15 [Mance], 4:16-24 [non-reliance on contractual terms]; 6:2-10 [difference between dealership and manufacturer warranties], 6:11-7:5 [claims grounded in statute, not contract].)

Plaintiffs also argue that Toyota USA’s reliance on Felisilda is misplaced where: (1) plaintiffs in that case asserted claims against both the dealership and the manufacturer, whereas here “[t]he selling dealership is not a party to this action” insofar as “Plaintiffs’ Complaint does not include any claims against the selling dealership, [i.e.,] the only signatory to the sales contract for the vehicle which is the subject of this litigation, aside from Plaintiffs”; and (2) the Felisilda court failed to properly interpret the “third-party” language in the arbitration contract in that case, resulting in a holding contrary to the conclusion of Kramer, supra, where Kramer’s arbitration agreement also contained “third-party” language and reached an opposite result as to equitable estoppel. (Opp’n, 11:7-12:5 [Toyota of Lancaster not a party], 12:6-13:20 [arguing Felisilda incorrectly decided].)

Last, Plaintiffs argue that this Court should hold to federal case law interpreting equitable estoppel in California per Kramer, supra, rather than hold to the decisions of our own State’s court of appeals because federal case law predicts how the California Supreme Court will rule on this issue and because Felisilda is pending a grant of review before the California Supreme Court. (Opp’n, 13:21-14:25.)

In reply, and in relevant part, Toyota USA argues that federal court decisions are non-binding on a California trial court and that Felisilda is controlling because, inter alia, the facts of that case are directly on point with the facts of this case, Felisilda is more recent in time that other cases speaking to equitable estoppel, and Felisilda rejected Kramer and similar case law. (Reply, 2:28-3:12 [Felisilda comparison], 3:13-22 [federal decisions non-binding], 4:15-8:13 [Felisilda expounded].)

The Court agrees with Plaintiffs.

Felisilda is distinguishable from the facts of this current action. The plaintiffs in that case sued both the manufacturer, FCA US LLC, and the dealership, Elk Grove Dodge, and alleged that FCA US LLC had breached express warranty accompanying the sale of the vehicle. (Felisilda v. FCA US LLC, supra, 53 Cal.App.5th at pp. 491-92, 499.) Here, on the other hand, Plaintiffs brought this action only against the manufacturer, Toyota USA. Plaintiffs did not include Toyota of Lancaster, the selling dealership and party to the arbitration agreement, as a named party in this action. Further, the Arbitration Provision in the agreement expressly defines claims as those “between you and us or our employees, agents, successors or assigns.” (Mot., Sniderman Decl., Ex. A, p. 7, Arbitration Provision.) Neither the selling dealership, Toyota of Lancaster, nor one of its “employees, agents, successors, or assigns” is named in this action or is seeking to enforce the arbitration provision. Further, while the TAC alleges that a warranty was issued in connection with the Subject Vehicle purchased by Plaintiffs, the TAC distinguishes manufacturer’s warranty from the sale contract itself. (See TAC, ¶ 4.) In fact, the sales contract between Toyota of Lancaster and Plaintiffs specifically disclaims any written warranties, making a distinction between the arbitration agreement therein and “any warranties covering the vehicle that the vehicle manufacturer may provide.” (Mot., Sniderman Decl., Ex. A, p. 4, Warranties Seller Disclaims.)

Further, the Court notes that the basis of equitable estoppel—which was relied upon by the Felisilda Court as the basis of its opinion—is not present here. As Felisilda stated, “‘[t]he fundamental point’ is 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, quoting NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 84, 100].) But in the case before us, Plaintiffs are not trying to use the arbitration clause 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). Hence there is no basis to hold that they are equitably estopped from preventing Toyota USA from arbitrating.

Thus, Felisilda is distinguishable from the current case. If it were not, this Court would be bound to follow its reasoning since it is controlling precedent. However, the Court does note that it finds the reasoning of several cases that have come to the opposite conclusion of Felisilda to be more persuasive, including Plaintiffs’ cited Kramer v. Toyota Motor Corp. (9th Cir. 2013) 705 F.3d 1122 and Jurosky v. BMW of North America, LLC (S.D. Cal. 2020) 441 F.Supp.3d 963, as well as Ngo v. BMW of North America, LLC (9th Cir. 2022) 23 F.4th 942.

Conclusion

Defendant Toyota Motor Sales, U.S.A., Inc.’s Motion to Compel Arbitration and Stay Proceedings is DENIED because Defendant has no standing to invoke the arbitration agreement between Toyota of Lancaster and Plaintiffs Hernandez Medina and Hernandez.