Judge: Anne Richardson, Case: 23STCV15662, Date: 2024-02-22 Tentative Ruling

Case Number: 23STCV15662    Hearing Date: February 22, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Pleadings

Plaintiff Julia Hernandez Balderas sues Defendant Toyota Motor Sales, U.S.A., Inc. (TMS) and Does 1 through 10 pursuant to a July 6, 2023 Complaint alleging claims of (1) Violation of Subdivision (d) of Civil Code Section 1793.2, (2) Violation of Subdivision (b) of Civil Code Section 1793.2, (3) Violation of Subdivision (a)(3) of Civil Code Section 1793.2, (4) Breach of Express Written Warranty [Civil Code Section 1791.2 Subdivision (a); Section 1794], and (5) Breach of the Implied Warranty of Merchantability [Civil Code Section 1791.1; Section 1794].

The claims arise from allegations that on January 16, 2022, Plaintiff purchased a 2022 Toyota Tunder (Vehicle) that was manufactured and/or distributed by TMS. Pursuant to this purchase, Plaintiff received an express written warranty in which TMS undertook to preserve or maintain the utility or performance of the Vehicle or to provide compensation if there was a failure in utility or performance for a specified period of time. TMS breached that warranty and other statutory duties when it and its authorized repair facilities failed to conform various defects in the Vehicle within a reasonable number of attempts and did not repurchase or replace the Vehicle. These defects include defective body, powertrain, safety, electrical, braking, and noise systems.

Motion Before the Court

On September 21, 2023, Defendant TMS filed a motion to compel binding arbitration of Plaintiff’s claims. The motion is premised on an arbitration provision in the purchase agreement for the Vehicle (the RISC), an agreement that was only signed by Plaintiff Hernandez Balderas and non-party DWWCT LLC.

On February 7, 2024, Plaintiff opposed TMS’s motion.

On February 9, 2024, TMS replied to Plaintiff’s opposition.

Defendant TMS’s motion is now before the Court.

Request for Judicial Notice

Per Defendant TMS’s request, the Court takes judicial notice of the Complaint in this action. (Mot., RJN, p. 1; Mot., Ameripour Decl., Ex. 1 [copy of Complaint]; see Evid. Code, §§ 452, subd. (d), 453, subds. (a)-(b).)

Motion to Compel Binding Arbitration

Order Compelling Binding Arbitration: DENIED.

I.

Standing – Introduction

Defendant TMS moves to compel arbitration of this action pursuant to an arbitration clause in the RISC. Though TMS is not a signatory to this sales contract—only Plaintiffs and DWWCT LLC signed—TMS cites two doctrines in support of standing to invoke the RISC’s arbitration clause: third-party beneficiary status; and equitable estoppel. (Mot., pp. 5-10; Mot., Ameripour Decl., Ex. 2.)

II.

Third-Party Beneficiary

“‘A third[-]party beneficiary is someone who may enforce a contract because the contract is made expressly for his benefit.’” (Jensen v. U-Haul Co. of California (2017) 18 Cal.App.5th 295, 301 (Jensen); see also Civ. Code, § 1559 [“A contract, made expressly for the benefit of a third person, may be enforced by him …”].) A person “only incidentally or remotely benefited” from a contract is not a third-party beneficiary. (Lucas v. Hamm (1961) 56 Cal.2d 583, 590.) To show the contracting parties intended to benefit it, a third party must show that, under the express terms of the contract at issue and any other relevant circumstances under which the contract was made: (1) “the third party would in fact benefit from the contract”; (2) “a motivating purpose of the contracting parties was to provide a benefit to the third party”; and (3) permitting the third party to enforce the contract “is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

Defendant TMS argues that “[r]eading the contract as a whole, it is clear TMS is an intended third-party beneficiary of the arbitration provision because it falls within the class of persons or entities for whom the arbitration provision was intended.” More specifically, TMS argues that “the claims against TMS arise out of and relate to not only the relationship between the parties, but Plaintiffs’ purchase and the condition of the Vehicle, given that Plaintiffs’ Claims arise out of and relate to the [RISC] and the ‘resulting’ warranty relationship that followed Plaintiffs’ execution of the [RISC].” TMS also argues that “Plaintiffs’ claims necessarily rely on the condition of the vehicle and TMS’s alleged liability for the alleged defects with the vehicle.” (Mot., pp. 5-6.)

The Court disagrees.

A reading of the entire arbitration provision leads the Court to conclude that only Plaintiff and DWWCT LLC or its “employees, agents, successors or assigns” benefit from and have the ability to request an order compelling arbitration of Plaintiff’s claims arising out of issues related to the Vehicle such that (1) TMS is not intended to benefit from the Vehicle’s sales contract, (2) the sales contract exhibits no purpose to provide a benefit to TMS, and (3) permitting TMS to enforce the contract is beyond the objectives of the sales contract and reasonable expectations of Plaintiffs and DWWCT LLC. (See Mot., Ameripour Decl., Ex. 2, Sales Contract, p. 7, Arbitration Provision; see also Goonewardene v. ADP, LLC, supra, 6 Cal.5th at p. 630.) This is because, as drafted, the sales contract’s arbitration provision only allows Plaintiffs and DWWCT LLC or its “employees, agents, successors or assigns” to submit to arbitration either (1) claims related to Plaintiffs’ purchase or the condition of the Vehicle or (2) claims related to any relationship with a third party that resulted from the purchase or condition of the Vehicle. Such a framework, at most, incidentally benefits TMS insofar as DWWCT LLC could perhaps submit to arbitration Plaintiff’s claim against TMS, but where TMS itself does not have the power to invoke the arbitration provision in the sales contract. (See Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5th 1324, 1338-1340 [discussing Goonewardene elements and reaching similar conclusion], review granted Jul. 19, 2023, S279969 [532 P.3d 270].) As persuasively reasoned by the court of appeal with respect to another manufacturer, to permit TMS to invoke the RISC’s arbitration clause based on third-party beneficiary status would mean that “any nonparties with whom [Plaintiffs] might have a dispute relating to the vehicle or its purchase, including parties whose existence or relationship [Plaintiffs] could not have contemplated, could claim they are intended beneficiaries of the arbitration agreement simply because they would benefit from arbitration.” (Montemayor v. Ford Motor Co. (2023) 92 Cal.App.5th 958, 974, review granted Sep. 20, 2023, S281237 [2023 WL 6151774] (Montemayor).)

Based on these determinations, the Court finds that TMS lacks standing to enforce the arbitration clause in the Vehicle’s sales contract as a third-party beneficiary.

III.

Equitable Estoppel

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.)

Here, TMS makes a number of arguments in favor of a finding of equitable estoppel. (Mot., pp. 6-10.) The Court finds none of these availing.

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.)

The Court agrees with this reasoning and notes that, here, the Complaint’s claims arise from the SBA, not terms contained in the Vehicle’s sales contract. (See Complaint, ¶¶ 20-21, 26-27, 30, 33, 37-39, Prayer, ¶¶ c, e.)

This reasoning is in line with Montemayor—also cited for its persuasive value—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 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. 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. Then, the dealership moved 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. The plaintiffs ultimately lost before the arbitrator and had 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, in Felisilda, “[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—Felisilda, Ochoa, and Montemayor—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, supra, 18 Cal.App.5th at p. 306.) 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).

Based on these determinations, the Court finds that TMS lacks standing to enforce the arbitration clause in the Vehicle’s sales contract under the doctrine of equitable estoppel.

IV.

Standing – Conclusion

Having failed to show that it has standing to enforce the arbitration clause in the Vehicle’s sales contract, Defendant TMS’s motion is DENIED. 

Conclusion

Defendant Toyota Motor Sales, U.S.A., Inc.’s Motion to Compel Binding Arbitration is DENIED.