Judge: Craig Griffin, Case: "Ramirez Reyes v. American Honda Motor Company, Inc.", Date: 2023-05-15 Tentative Ruling

The Motion to Compel Arbitration brought by Defendant American Honda Motor Co., Inc. is DENIED, as the moving party is not a signatory to the relevant agreement and equitable estoppel does not apply, pursuant to Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324.  Similarly, the Court finds that Defendant is not entitled to enforce the arbitration agreement as a third-party beneficiary.

Initially, it is undisputed the Federal Arbitration Act (“FAA”) applies to the instant motion. (¶2 of Shapiro Declaration and Exhibit 1 thereto; See also Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5^th 337, 346-348 and Comley v. Giant Inland Empire RV Center, Inc. (C.D. Cal. 2013) 2013 WL 12131180 at 3.)  The Federal Arbitration Act requires the existence of a valid arbitration agreement, before arbitration can be compelled. (See 9 U.S.C. §2). “[I]t is a cardinal principle that arbitration under the FAA ‘is a matter of consent, not coercion.’” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4^th 223, 236.)  “Thus, ‘a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’” (Id.) “If a party to a civil action asks the court to compel arbitration of the pending claim, the court must determine in a summary proceeding whether an ‘agreement to arbitrate the controversy exist.’” (Iyere v. Wise Auto Group (2023) 87 Cal.App.5^th 747, 754.) “Because the existence of the agreement is a statutory prerequisite to granting the petition, the petitioner bears the burden of proving its existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4^th 394, 413.) 

In support of this motion, Defendant provides a Retail Installment Sale Contract (“RISC”) executed by Rosa Isabel Ramirez Reyes.  (¶2 of Shapiro Declaration and Exhibit 1 thereto.) Plaintiff does not dispute the authenticity of this agreement or her signatures thereon.  The RISC indicates it was entered into between Rosa Isabel Ramirez Reyes (“Buyer”) and Premier Norm Reeves Honda Superstore (“Seller-Creditor”). (¶2 of Shapiro Declaration and Exhibit 1 thereto.)  The parties dispute whether this agreement is enforceable by non-signatory Defendant American Honda Motor Co., Inc.

“Although the FAA preempts any state law that stands as an obstacle to its objective of enforcing arbitration agreements according to their terms,…we apply general California contract law to determine whether the parties formed a valid agreement to arbitrate their dispute.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 618.) “General contract law principles include that ‘[t]he basic goal of contract interpretation is to give effect to the parties’ mutual intent at the time of contracting.” (Id.)

Additionally, “[u]nder certain circumstances, a nonsignatory to an arbitration agreement may seek to enforce it against a signatory.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 618.) “Whether such enforcement is permissible is a question of state law.” (Id.)

“Under the doctrine of equitable estoppel, ‘as applied in ‘both federal and California decisional authority, 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.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, 495).  “By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement.” (Id. at 496). “Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (Id.). 

Here, it is undisputed Plaintiff’s claims arise from manufacturing warranties provided by Defendant American Honda Motor Co., Inc. (¶10 of Complaint; See also Motion: 8:9-13 [“The crux of the Complaint is that the Subject Vehicle allegedly developed defects and AHM failed to conform the Subject Vehicle to the express and implied warranties.”])  In dispute, is whether these warranties are “founded in and inextricably bound up with” the sales contract.   

In brief, the court in Felisilda found that manufacturing warranties are inextricably bound with the sales agreement, while the court in Ochoa found that they are not.  (See Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, 496 and Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 619-620.)  This Court opts to follow the reasoning in Ochoa and, for the reasons stated therein, finds that equitable estoppel does not apply.

The Ochoa Court “disagree[d] with Felisilda that ‘the sales contract was the source of [FCA’s] warranties at the heart of this case.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 620.)  Instead, the Court explained 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.)

The Court in Ochoa further explained: “California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 621.) “[O]ur Supreme Court [has] distinguished between, on the one hand, warranty obligations flowing from the seller to the buyer by contract, and, on the other hand, manufacturer warranties ‘that arise[] independently of a contract of sale between the parties.’” (Id.)  Based on the above, the Court in Ford Motor Warranty Cases held that “Plaintiff’s claims in no way rely on the sale contracts” and, consequently, “[e]quitable estoppel does not apply.” (Id.)

As was the case in Ochoa and Felisilda, Defendant asserts Plaintiffs’ claims fall within the arbitration provision, given the language referencing third parties and the condition of the vehicle; however, the Court in Ochoa “also disagree[d] with the Felisilda court’s interpretation of the sale contract as broadly calling for arbitration of claims ‘against third party nonsignatories.’” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 620.)  Citing the identical language discussed in Felisilda and included herein, referring to “any such relationship with third parties who do not sign this lease,” the Ford Motor Warranty court explained: “We do not read this italicized language as consent by the purchaser to arbitrate claims with third party nonsignatories.  Rather, we read it as a further delineation of the subject matter of claims the purchasers and dealers agreed to arbitrate.  They agreed to arbitrate disputes ‘between’ themselves – ‘you and us’ – arising out of or relating to ‘relationship[s],’ including ‘relationship[s] with third parties who [did] not sign th[e] [sale] contract[s],’ resulting from the ‘purchase, or condition of th[e] vehicle, [or] th[e] [sale] contract.’” (Id.)  “It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties.” (Id.)

Consistent with Ochoa, this Court finds that “manufacturer vehicle warranties that accompany the sale of motor vehicles…are independent of the sale contract.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 619-620.)  Consequently, as Plaintiff herein is not asserting any claims against Defendant, based on the terms of the RISC (See Complaint, generally), equitable estoppel does not apply.

Interestingly, while Defendant asserts that Felisilda is the better reasoned authority, the Felisilda opinion includes no analysis of the relevant issues.  (Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, 496-497.)  Instead, citing an allegation that “express warranties accompanied the sale,” the court merely concluded “the sales contract was the source of the warranties at the heart of this case,” without any further discussion or citation to authority. (Id.)  Indeed, rather than address whether manufacturer warranties are included within or “intimately founded in and intertwined” with dealership sales contracts, the Felisilda court focused on the Felisildas’ purported agreement to arbitrate third-party claims regarding the condition of the vehicle.  (Id.)  Felisilda did not address the language limiting enforcement of the arbitration provision.

Next, Defendant asserts entitlement to enforce the Agreement as a third-party beneficiary.  “As a general rule, only a party to an arbitration agreement may enforce the agreement.” (Felisilda v. FCA US LLC (2020) 53 Cal.App.5^th 486, 495).  However, “’[a] contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.’” (Goonewardene v. ADP, LLC (2019) 6 Cal.5^th 817, 827). 

Here, as was the case in Ochoa and for the same reasons stated therein, “the sale contract[] reflect[s] no intention to benefit a vehicle manufacturer under Goonewardene.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 306 Cal.Rptr.3d 611, 623.) The holding in Ochoa applies with equal force herein, as the instant action includes the same contractual language and Defendant identifies no other language, which it asserts demonstrates an intent to benefit it. (Motion: 16:19-17:1.)

Defendant’s Request for Judicial Notice is DENIED as irrelevant and unnecessary.  (Zucchet v. Galardi (2014) 229 Cal.App.4^th 1466, 1474.)