Judge: Craig Griffin, Case: "Rodriguez vs. Nissan North America, Inc", Date: 2023-05-22 Tentative Ruling

Defendant Nissan North America, Inc.’s (“Defendant”) Motion to Compel Arbitration (“Motion”) is DENIED.

The court finds the recent case of Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal. App. 5th 1324 [2023 WL 2768484] to be the controlling precedent over Felisilda v. FCA US, LLC  (2020) 53 Cal.App.5th 486.  Additionally, the fact pattern in Ochoa is almost identical to the facts of the present case.  Consistent with Ochoa, the court finds Defendant is not entitled to enforce the Retail Sales Installment Contract (“RISC”) pursuant to equitable estoppel and as such, Defendant failed to meet its burden to establish an applicable arbitration agreement.

“Arbitration is favored in this state as a voluntary means of resolving disputes, and this voluntariness has been its bedrock justification. As we stated recently: “[P]olicies favoring the efficiency of private arbitration as a means of dispute resolution must sometimes yield to its fundamentally contractual nature, and to the attendant requirement that arbitration shall proceed as the parties themselves have agreed.” ‘ “ (Armendariz v. Found. Health Psychcare Servs., Inc. (2000) 24 Cal. 4th 83, 115.)  “The trial court's role is “confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract.” [Citation.] The arbitrator decides any arbitrable claim, “even if it appears to the court to be frivolous.” ‘ “ (Amalgamated Transit Union Loc. 1277 v. Los Angeles Cnty. Metro. Transportation Auth. (2003) 107 Cal. App. 4th 673, 686.)

"The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (“Engalla”); Green Tree Financial Corp.-Alabama v. Randolph (2000) 531 U.S. 79, 91-92.)

“[B]oth California and federal courts have recognized limited exceptions to this rule, allowing nonsignatories to an agreement containing an arbitration clause to . . . be compelled to arbitrate, a dispute arising within the scope of that agreement.”  (DMS Servs., Inc. v. Superior Court (2012) 205 Cal. App. 4th 1346, 135.)  “A nonsignatory can be compelled to arbitrate when a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to arbitrate as well.”  (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal. App. 4th 1222, 1240.)  Further, “[a] nonsignatory plaintiff can be compelled to arbitrate a claim even against a nonsignatory defendant, when the claim is itself based on, or inextricably intertwined with, the contract containing the arbitration clause.”  (Id., at 1241.)

The Federal Arbitration Act (“FAA”) applies to the RISC per the terms of the RISC.  The RISC states, “Any arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S.C. § 1 et. seq.) and not by any state law concerning arbitration.”  (Motion, Ex. B.) 

While there is an arbitration clause within the RISC, the issue before the court is whether Defendant, which is third-party non-signatory to the RISC, can enforce the arbitration clause against Plaintiff.  The RISC does not specifically acknowledge or include Defendant within the terms of the contract or the arbitration clause.  The terms “we” or “us” in the arbitration clause are defined as the Seller-Creditor, which is identified as Nissan of Costa Mesa.  (Motion, Ex. B at p. 1.)  The arbitration clause specifies it is:

“Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and score 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 credit application, 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 this contract) shall, at your or our election, be resolved by neutral binding arbitration and not by a court action. . . .”

““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.” [Citation.] “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. [Citations.] ... “The words of a contract are to be understood in their ordinary and popular sense.” ’ [Citation.] Furthermore, ‘ “[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” ’ ” [Citation.][¶] Under certain circumstances, a nonsignatory to an arbitration agreement may seek to enforce it against a signatory. Whether such enforcement is permissible is a question of state law.”  (Ochoa, supra, 2023 WL 2768484 at 3.)

Defendant is not a party to the Agreement. Additionally, while Defendant initially asserted entitlement to enforce the RISC as a third-party beneficiary, Defendant concedes this argument is no longer viable, given the recent decision in Ochoa.  (Reply at 4:15-19.)  The court will only proceed with the equitable estoppel argument. 

“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. [Citations.]  ‘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.’” (Felisilda, supra, 53 Cal.App.5^th at 495-96.)

“Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement.” (Id., at 496.)  “’The 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.’” (Id.) “In any case applying equitable estoppel to compel arbitration despite the lack of an agreement to arbitrate, a nonsignatory may compel arbitration only when the claims against the nonsignatory are founded in an inextricably bound up with the obligations imposed by the agreement containing the arbitration clause.” [Emphasis in original.]  (Id.) “In determining whether the plaintiffs’ claim is founded on or intimately connected with the sales contract, we examine the facts of the operative complaint.” (Id.)

Defendant urges the Court to follow the holding in Felisilda.  However, the Court in Ochoa examined substantially contractual language that is present in this matter and expressly declined to follow Felisilda. (Ochoa, supra, 2023 WL 2768484 at 2 and 4.) The Court of Appeal in Ochoa “disagree[d] with Felisilda’s determination that ‘the sales contract was the source of [FCA’s] warranties at the heart of this case.” (Id.)  Instead, the Ochoa 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.)  Ochoa held, “plaintiffs’ claims are based on FMC's statutory obligations to reimburse consumers or replace their vehicles when unable to repair in accordance with its warranty. Certain plaintiffs also sued on theories of breach of implied warranty of merchantability and fraudulent inducement. Not one of the plaintiffs sued on any express contractual language in the sale contracts. [¶] 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. To the contrary, the sale contracts disclaim any warranty on the part of the dealers, while acknowledging no effect on “any warranties covering the vehicle that the vehicle manufacturer may provide.” In short, the substantive terms of the sale contracts relate to sale and financing and nothing more.”  (Id., at *5.) “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. To the contrary, the sale contracts disclaim any warranty on the part of the dealers, while acknowledging no effect on “any warranties covering the vehicle that the vehicle manufacturer may provide.” In short, the substantive terms of the sale contracts relate to sale and financing and nothing more.” (Id.)

“[Defendant’s] argument that plaintiffs’ manufacturer warranty claims are founded in the sale contracts because California law treats all warranty claims as contract claims is not supported by California law.  [¶]  California law does not treat manufacturer warranties imposed outside the four corners of a retail sale contract as part of the sale contract. In Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57 (Greenman), our Supreme Court 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.” [Emphasis in original.] (Id.)  “[C]ontrary to Defendant’s assertion, it does not “naturally follow” from any contractual character of manufacturer warranty claims that they inhere in a retail sale contract containing no warranty terms.”  (Ochoa, supra, 2023 WL 2768484 at *6.)  “Again, the “ ‘ “fundamental point” ’ ” of using equitable estoppel to compel arbitration is to prevent a party from taking advantage of a contract's substantive terms while avoiding those terms requiring arbitration. (Felisilda, supra, 53 Cal.App.5th at p. 496.) Plaintiffs’ claims in no way rely on the sale contracts. Equitable estoppel does not apply.”  (Ochoa, supra, 2023 WL 2768484 at *6.)

Defendant cites to multiple cases for the premise that the doctrine of equitable estoppel permits Defendant to enforce the arbitration clause, however none of the cases involve Song-Beverly claims against vehicle manufacturers, and none have the almost identical facts patterns that Ochoa has to the present case.

“[W]ith limited exceptions only parties to an arbitration agreement can enforce it or be required to arbitrate.”  (Jones v. Jacobson (2011) 195 Cal. App. 4th 1, 17.)  For the same reasons laid out in Ochoa above, the doctrine of equitable estoppel does not apply to the present case.  While there is a valid arbitration clause between Plaintiff and the non-party Nissan of Costa Mesa, that arbitration clause does not cover or pertain to Defendant and Defendant cannot use the clause to force Plaintiff to arbitrate Plaintiff’s claims.  There is no basis for Defendant to be able to enforce the arbitration clause.

The motion is denied.

Plaintiff to give notice.