Judge: Craig Griffin, Case: "Silva v. FCA US, LLC", Date: 2023-06-12 Tentative Ruling

The Motions to Compel Arbitration brought by Defendants FCA US, LLC and Tulare SAG, Inc. (dba Lampe Chrysler Dodge Jeep Ram) are both DENIED, as neither moving party is 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.

Initially, it is undisputed the Federal Arbitration Act (“FAA”) applies to the instant motion.  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, Defendants provide a Retail Installment Sale Contract (“RISC”) executed by Michelle Silva.  (¶2 of Sandhu Declaration and Exhibit A thereto [ROA No. 35]; See also ¶3 of Sandhu Declaration and Exhibit B thereto [ROA No. 40.]) Plaintiff does not dispute the authenticity of this agreement or her signature thereon.  The RISC indicates it was entered into between Michelle Silva (“Buyer”) and non-party Selma Chrysler Dodge Jeep Ram (“Seller-Creditor”). (Id.)

The parties dispute whether this agreement is enforceable by non-signatory Defendants FCA US LLC and Tulare SAG, Inc. dba Lampe Chrysler Dodge Jeep Ram.

“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, 1332.) Additionally, “[u]nder certain circumstances, a nonsignatory to an arbitration agreement may seek to enforce it against a signatory.” (Ibid.) “Whether such enforcement is permissible is a question of state law.” (Ibid.)

“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 that Plaintiff’s claims arise from manufacturing warranties provided by Defendant FCA US, LLC. (¶14 of Complaint [“These causes of action arise out of the warranty obligations of FCA in connection with a motor vehicle for which FCA issued a written warranty”]; See also FCA Motion: 2:7-14 and Tulare Motion: 5:24-27 [“It cannot be reasonably disputed that Plaintiff’s relationship with Lampe CDJR which is the subject of her negligent repair claim, arises directly as a consequence of the warranties Plaintiff received when she entered into the sales contract…”]  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, 1334.) 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, 1334.)  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.” (Ibid.)

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, 1335.) “[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. at 1336.)  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.” (Ibid.)

As was the case in Ochoa and Felisilda, Defendants assert Plaintiff’s claims fall within the arbitration provision, given 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, 1334.)  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. at 1334-1335.)  “It says nothing of binding the purchaser to arbitrate with the universe of unnamed third parties.” (Id. at 1335.)

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, 1334.) Consequently, as Plaintiff herein is not asserting any claims against Defendants, based on the terms of the RISC (See Complaint, generally), equitable estoppel does not apply.

Interestingly, while Defendants asserts that Felisilda is the better reasoned authority on this issue, 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 FCA US LLC 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.) 

In order to determine whether Defendant is a “third party beneficiary,” this court must “carefully examin[e] the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5^th 817, 829-830.)  “All three elements must be satisfied to permit the third party action to go forward.” (Id. at 830.)

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, 1338.) 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 FCA US LLC. (FCA Motion: 7:fn. 2.)

Lastly, citing ¶48 of the Complaint and Thomas v. Westlake (2012) 204 Cal.App.4^th 605, Defendant FCA US LLC asserts entitlement to enforce the Arbitration Agreement pursuant to agency principles. (FCA Motion: 9:15-26.)   As noted by the Court in Thomas, “a plaintiff’s allegations of an agency relationship among defendants is sufficient to allow the alleged agents to invoke the benefit of an arbitration agreement executed by their principal even though the agents are not parties to the agreement.” (Thomas v. Westlake (2012) 204 Cal.App.4^th 605, 614-615.)

This argument is unavailing to Defendant, as the Complaint does not allege an agency relationship among the defendants or with the selling dealership.

At best, ¶48 of the Complaint (included within the First Cause of Action) alleges that “Defendant FCA and its representatives in this state have been unable to service or repair the Vehicle to conform to the applicable express warranties after a reasonable number of opportunities.” (¶48 of Complaint; See also ¶54 of Complaint [similar allegations].)  This language does not expressly identify the dealership or assert an agency relationship with the seller.

Moreover, to the extent the above allegation can be interpreted as identifying an agency relationship between Defendant FCA and the relevant dealership, the Court in Ochoa rejected a similar theory: “When FMC has to fix something under warranty, consumers can go to a dealer to get it fixed.  This does not mean the dealers are FMC’s agents in connection with the sale of vehicles to consumers that the dealer bought from FMC.” (Ford Motor Warranty Cases (Ochoa) (2023) 89 Cal.App.5^th 1324, 1341.)  “Here, there is no connection between each of (1) plaintiffs’ claims against FMC; (2) any alleged agency relationship between FMC and the dealers; and (3) the sale contracts between the dealers and plaintiffs.” (Ibid.)  “There are no allegations that the vehicles sold belonged to FMC, as opposed to the dealer.  There are no allegations that FMC, rather than the dealer, financed the sales.  There are no allegations that FMC controlled or had any direct interest in the transaction.  In short, there are no allegations that the dealers were transacting other than for their own account in entering into the sale contracts.” (Id. at 1343.)  “In short, in the absence of some nexus between the agency allegations, plaintiffs’ claims, and the sale contracts, FMC is not entitled to compel plaintiffs to arbitrate as an undisclosed principal.” (Ibid.)

For the same reasons stated above, Defendant herein has not demonstrated entitlement to enforce the arbitration agreement, merely because of the discrete reference to “representatives” included in ¶48 of the complaint.

Based on all of the above, the motions to compel arbitration brought by Defendants are denied.

Plaintiff’s Request for Judicial notice is DENIED, as the Court need not take judicial notice of published opinions.  (C.C. v. Superior Court (2008) 166 Cal.App.4^th 1019, 1021, fn. 1.)

Plaintiff to give notice.