Judge Curtis A. Kin, Case 22STCV12547 2023-03-23 Tentative Ruling

Judge: Curtis A. Kin, Case: 22STCV12547, Date: 2023-03-23 Tentative Ruling

Case Number: 22STCV12547 Hearing Date: March 23, 2023 Dept: 72

MOTION TO COMPEL ARBITRATION

AND STAY PROCEEDINGS

Date: 3/23/23 (8:30 AM)

Case: Moises Flores et al. v. K Motors SJC, LLC et al. (22STCV12547)

TENTATIVE RULING:

Defendants Nissan North America, Inc. and K Motors SJC, LLC’s Motion to Compel Arbitration and Stay Proceedings is GRANTED.

Defendants’ requests to take judicial notice of the Complaint and their Answers are GRANTED, but only for the existence of the documents, not the truth of the matters asserted therein. (See Evid. Code § 452(d); Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-69.)

Defendants’ request to take judicial notice of the Notice of Entry of Dismissal in Dina C. Felisilda, et al, v. FCA US LLC, et al. is DENIED as “unnecessary to the resolution” of the issues before the Court. (Martinez v. San Diego County Credit Union (2020) 50 Cal.App.5th 1048, 1075.)

Defendants’ evidentiary objections are OVERRULED.

Defendants Nissan North America, Inc., the manufacturer of the subject vehicle, and K Motors SJC, LLC dba Glendale Nissan, the facility where plaintiffs delivered the subject vehicle for repair, seek to compel arbitration of plaintiffs Moises Flores and Eva Salazar Alvarez’s claims against them under the provisions of the Retail Installment Sales Contract (“RISC”), which plaintiff Flores signed. It is undisputed defendants are not signatories to the RISC between Flores and dealer Nissan of Mission Hills. (Wilner Decl. ¶ 4 & Ex. 5.)

Generally, “one must be a party to an arbitration agreement to be bound by it or invoke it.” (Westra v. Marcus & Millichap Real Estate Investment Brokerage Co., Inc. (2005) 129 Cal.App.4th 759, 763.) However, the equitable estoppel exception to the general rule allows a “non-signatory defendant [to] invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claim when the causes of action against the nonsignatory are ‘intimately founded in and intertwined with’ the underlying contract obligations.” (Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 786.)

Here, the outcome is dictated by binding authority in Felisilda v. FCA US LLC (2020) 53 Cal.App.5th 486. In Felisilda, the Court of Appeal determined that the sales contract between the plaintiff purchaser and dealership formed the core of the plaintiffs’ claims against the nonsignatory defendant manufacturer for breach of the express warranty that accompanied the sale of the vehicle to plaintiffs. (Felisilda, 53 Cal.App.5th at 496-497.) Just as in Felisilda, plaintiff Flores in this action signed an RISC with identical arbitration language, stating: “Any claim or dispute, whether in contract, tort, statute or otherwise…between you and us…which arises out of or relates to…[the] condition of this vehicle…shall….be resolved by neutral, binding arbitration and not by a court action.’” (Compare Wilner Decl. ¶ 4 & Ex. 5 with Felisilda, 53 Cal.App.5th at 496 [language in sales contract states “‘[a]ny claim or dispute, whether in contract, tort, statute or otherwise ... between you and us ... which arises out of or relates to ... [the] condition of this vehicle ... shall ... be resolved by neutral, binding arbitration and not by a court action.’”.)

The Court of Appeal in Felisilda concluded that plaintiffs’ claim against the manufacturer “directly relates to the condition of the vehicle that they allege to have violated warranties they received as a consequence of the sales contract.” (Felisilda, 53 Cal.App.5th at 497.) The Court thus held that “because 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 are estopped from refusing to arbitrate their claim against [the nonsignatory manufacturer].” (Ibid.)

Plaintiffs argue that the express written warranty contract into which plaintiffs allegedly entered is not part of the RISC. (See Compl. ¶ 15 & Ex. 1; Powell Decl. ¶ 6 & Ex. 2 [Warranty Information Booklet].) Even though plaintiffs do not allege that they received the express warranty in connection with purchase of the subject vehicle, the express warranty is nevertheless an element of the RISC. (Hauter v. Zogarts (1975) 14 Cal.3d 104, 117 [“Into every mercantile contract of sale the law inserts a warranty that the goods sold are merchantable….”]; A. A. Baxter Corp. v. Colt Industries, Inc. (1970) 10 Cal.App.3d 144, 153 [“A warranty is as much one of the elements of sale and as much a part of the contract of sale as any other portion of the contract and is not a mere collateral undertaking”]; Windham at Carmel Mountain Ranch Assn. v. Sup. Ct. (2003) 109 Cal.App.4th 1162, 1168 [“A warranty is a contractual term concerning some aspect of the sale, such as title to the goods, or their quality or quantity”].)

Plaintiffs cite authorities for the proposition that a manufacturer’s warranties are not a part of the sales contract. (See Corporation of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v. Cavanaugh (1963) 217 Cal.App.2d 492, 514 [finding defendant could be held liable for false representation even though there was no privity of contract between defendant and plaintiff]; Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 61 [finding certain warranties arise “independently of a contract of sale between the parties”].) Even if the express warranty were separate from the contract, plaintiffs would have no standing to assert claims under the Song-Beverly Consumer Warranty Act but for the RISC. To have standing to bring a Song-Beverly Act claim, a consumer must buy or lease “a new motor vehicle from a person (including an entity) engaged in the business of manufacturing, distributing, selling, or leasing new motor vehicles at retail.” (Dagher v. Ford Motor Co. (2015) 238 Cal.App.4th 905, 926.) Accordingly, plaintiffs’ claims concerning the condition of the subject vehicle are intimately founded in and intertwined with the RISC.

Plaintiffs attempt to distinguish Felisilda on the ground that the signatory dealership, Nissan of Mission Hills, is not a party to this action. However, the Felisilda plaintiffs dismissed the dealership before filing the appeal. (Felisilda, 53 Cal.App.5th at 489 [“The trial court ordered the Felisildas to arbitrate their claim against both Elk Grove Dodge and FCA. In response, the Felisildas dismissed Elk Grove Dodge. The matter was submitted to arbitration, and the arbitrator found in favor of FCA. The trial court confirmed the arbitrator's decision. From the resulting judgment, the Felisildas appeal”].) Despite the dismissal of the dealership, the Court of Appeal considered the “question of whether a nonsignatory to the agreement has a right to compel arbitration under” the agreement therein and held that the plaintiffs’ claims against the manufacturer were subject to arbitration. (Id. at 495.) The Felisilda court did not require any signatory to the sales contract to be a party to litigation. Likewise, even though the dealership is not party to this litigation, plaintiffs’ claims against defendants are subject to arbitration under the RISC.

Plaintiffs’ claims arise out of the RISC because the allegations pertain to the condition of the subject vehicle, including alleged defects in the vehicle’s electrical system, and defendants’ failure to repair the vehicle or make restitution after a reasonable number of opportunities to repair the vehicle. (Compl. ¶¶ 16, 19, 20, 22, 23, 31.) Accordingly, plaintiffs are estopped from refusing to arbitrate claims against non-signatory defendants Nissan North America, Inc. and K Motors SJC, LLC in this action.

Plaintiffs cite to the Ninth Circuit case, Ngo v. BMW of N. Am., LLC (9th Cir. 2022) 23 F.4th 942 for the proposition that when the non-signatory manufacturer attempts to move to compel arbitration on its own without the dealership also moving to compel arbitration, the motion to compel should be denied. (Ngo, 23 F.4th at 950.) However, federal Court of Appeals opinions are not binding on this Court. (Qualified Patients Ass'n v. City of Anaheim (2010) 187 Cal.App.4th 734, 764 [lower federal court cases are not binding].) For the reasons stated above, Felisilda requires the granting of defendant’s motion.

Plaintiffs argue that the agreement to arbitrate is unenforceable because it is unconscionable. (See Civ. Code § 1670.5(a).) An arbitration agreement must be both procedurally and substantively unconscionable to be unenforceable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114.)

Plaintiffs contend that the RISC was a contract of adhesion because it was presented on a take it or leave it basis. Even if the RISC were adhesive, this alone does not render the agreement unenforceable. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915, quoting Gentry v. Superior Court (2007) 42 Cal.4th 443, 469 [“The adhesive nature of the contract is sufficient to establish some degree of procedural unconscionability. Yet ‘a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided’”].)

Plaintiffs contend that the RISC is unfair or one-sided because the arbitration provision requires each party to bear their own attorney, expert, or other fees, when Civil Code § 1794(d) allows a prevailing plaintiff to recover costs and fees. However, the arbitration provision in the RISC states: “Each party shall be responsible for its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law.” This provision allows the arbitrator to award fees to prevailing plaintiffs under Civil Code § 1794(d).

Plaintiffs also contend that the arbitration provision could require them to pay arbitration fees up to $5,000, which would serve as a “deterrent to the bringing of consumer claims.” (Fisher v. MoneyGram Intern., Inc. (2021) 66 Cal.App.5th 1084, 1105.) In the reply, however, defendants clarify that plaintiffs would be responsible for at most $200 for a case filing fee with the American Arbitration Association, defendants’ preferred provider. (Wilner Reply Decl. ¶ 2 & Ex. 6.) This amount does not deter consumers from bringing claims in arbitration such that the arbitration provision is rendered one-sided.

Because plaintiffs fail to show that the arbitration provision in the RISC is unconscionable, the claims in this action are arbitrable.

However, plaintiff Eva Salazar Alvarez did not sign the arbitration provision. Accordingly, the Court cannot compel plaintiff Alvarez to arbitration.

The Court declines to continue or take this matter under submission pending the final decision in Martha Ochoa et al. v. Ford Motor Company, B312261, in the Second District of the California Court of Appeal.

For the foregoing reasons, the motion is GRANTED IN PART. Plaintiff Moises Flores’ claims must be resolved in arbitration, and this matter is stayed pending completion of such arbitration.